1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Articles (245) 

Kyle Bass Wins Big on MGIC Turnaround

January 12, 2012 | About:

A few months ago, hedge fund manager Kyle Bass revealed a large stake in mortgage insurer MGIC (NYSE:MTG).

At the time he said MGIC is different from (PMI Group Inc. (PMI) because MGIC has a "pretty big positive equity position. We think they’ll be one of… the last ones standing; we’re in it for the long haul.”

In a later interview Bass mentioned that there is little downside risk left in the U.S. housing market.

Bass studied every housing bubble in the past 100 years and realized that it takes about 7 years after prices peak for there to be a recovery. Since house prices peaked in 2006, one could guess that a housing recovery could start in 2013.

Bass said, "You can see that the pig has moved through the python in terms of U.S. housing losses."

Bass purchased the shares for $2.50 on Oct. 31, 2011. He later said that he would have purchased more of the company if he had been allowed to. MTG directors have created anti-take over provisions that prevent hedge fund managers from gobbling up large stakes of MTG.

In the last two months, shares of MTG have rocketed to $4.30 per share.

The key question for the company will be what liquidity ratio regulators require going forward. MTG can be profitable with 25x leverage although it is expected that the company will be granted waivers and will be allowed to operate with 30x risk to capital ratio.

Bass has been particularly bearish on the European debt crisis and expects a number of European debt defaults in 2012. Previously, he profited from the collapse of the U.S. subprime industry.

Rating: 2.7/5 (14 votes)


Please leave your comment:

Performances of the stocks mentioned by matsandalex

User Generated Screeners

carter2u2Small Cap No Debt
bkw82Predictable/ebitda 10/52 week
pbarker46Hist. High Yield
andrewgu999valleylink - gogogo
DBrizanROTA ultimate18nov2017 1041p
DBrizanROTA18nov2017 1041p
DBrizanROTA18nov2017 1035p
DBrizanROTA18nov2017 1032p
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat