Editor's Note

Housing prices continue to rise and mortgages are easier to get. This company makes it easier for people with less than 20% down payment to buy a home.


RDN - Radian Group - Company Profile

Radian Group Inc., through its subsidiaries, provides mortgage and real estate products and services in the United States. It operates through two segments, Mortgage Insurance and Services. The Mortgage Insurance segment offers credit-related insurance coverage, principally through private mortgage insurance that protects mortgage lenders and third-party beneficiaries by mitigating default-related losses on residential mortgage loans made to home buyers, as well as facilitates the sale of these mortgage loans in the secondary mortgage market. It provides primary mortgage insurance coverage on residential first-lien mortgage loans. This segment primarily serves mortgage bankers, mortgage brokers, commercial banks, savings institutions, credit unions, and community banks. The Services segment offers outsourced services, information-based analytics, valuations, and specialized consulting and surveillance services for buyers and sellers of, and investors in, mortgage- and real estate-related loans and securities, and other consumer asset-backed securities. This segment provides loan review and due diligence, monitoring of mortgage servicer and loan performance, real estate valuation and component services, real estate owned asset management services, and outsourced mortgage services. It primarily serves financial institutions, government-sponsored enterprises, securitization trusts, investors, regulators, and other mortgage-related service providers. Radian Group Inc. was founded in 1977 and is headquartered in Philadelphia, Pennsylvania. Company description from FinViz.com.

Expected earnings Jan 25th.

Radian reported Q3 earnings of 46 cents that beat estimates for 42 cents. Revenue rose 3% to $270 million. Mortgage insurance written rose 3% to $15.1 billion. Total primary mortgage insurance in force rose 8% to $196.8 billion. Deliquent loans were flat for the quarter. The company said defaults were declining.

The company provides mortgage insurance for credit worthy buyers who do not have the 20% down payment to avoid the insurance requirement. This means more millennials are able to buy houses and they are the population sector with rising incomes and trying to build their credit while buying homes to raise a family.

The company just completed the sale of Clayton EuroRisk, a provider of outsourced mortgage services in Europe, to a global investment firm. Radian is trying to focus on its core business in order to reduce expenses and maximize profits.

Shares gained $1 on the news four days ago and then moved sideways until today. Shares posted a minor gain but closed at a new nine-year high. (post financial crisis)

Buy RDN shares, currently $22, initial stop loss $20.45.
Alternate position: Buy Feb $23 call, currently 70 cents. No initial stop loss.


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Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps more than $1.00 at the market open.