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Kyle Bass Bullish on Housing?

November 11, 2011 | About:


Kyle Bass just revealed a 4.9% stake in mortgage insurer MGIC (MTG). Bass has gained fame for shorting the subprime market and the European debt markets. It is rare that Bass purchases plain vanilla stocks making the MGIC purchase especially noteworthy.
“Everyone paints the [mortgage insurance companies] with a broad brush that since they took PMI … they’re all going to go the way of the dodo,” said Mr. Bass, at a housing-industry conference.
Shares of MTG have plummeted in 2011 from $12 to less than $3 per share. Mr. Bass purchased the shares for $2.50 on Oct. 31, 2011.

Insiders have purchased a boatload of stock starting in April 2011. Insiders have accumulated hundreds of thousands of shares at prices ranging from $1.89-$7.70. The most recent insider buy was on Aug. 26, 2011 at $2.34.

Kyle Bass thinks that MGIC is different than PMI because MGIC has a "pretty big positive equity position.” However, traders should note that Bass appears to be making a long-term bet on MGIC. He said, “We think they’ll be one of … the last ones standing; we’re in it for the long haul.”

Investors looking to ride Mr. Bass' coattails should note that he made a similar investment in Seahawk Drilling that was unsuccessful. Seahawk (HAWK) was negatively impacted by the BP oil spill and Bass scooped up shares at $4. The shares are currently on the Pink Sheets and trade for $1.28.

Rating: 3.7/5 (11 votes)


BlueHorseShoe82 - 3 years ago
You are wrong about bass' HAWK investment. He actually did pretty well. When he bought the stock, he purchased enough to get on the equity committee, where he secured the ability to provide the DIP financing. He sold calls against his investment, so his shares were called away when the stock rocketed back above $5. This was purposeful and worked out accordingly. If you read his filings in detail you can see this. He also stands to receive HERO shares as a part of the DIP loan.

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