Howard Marks (Trades, Portfolio), the chairman of Oaktree Capital who calls his investing approach “entirely bottom-up,” is continuing to build a stake in private mortgage insurer NMI Holdings Inc. (NMIH, Financial) as its stock posted an almost 20% total decline year to date.
Marks increased the position more than 27% on Feb. 20 to a total of 3,422,674 shares, giving him 5.86% interest in the company. Previously, Marks started the stake with 600,300 shares in the third quarter of 2014 when the price averaged about $10 for the quarter. In the fourth quarter, he boosted it to 2,689,080 shares as the price slid to $9 on average.
Marks’ Feb. 20 purchase took advantage of a 10.4% decline in the stock from its closing price the previous day to around $7.54 per share. Shares closed Friday around $7.32, near a two-year low.
The decline came as the company announced its fourth quarter results on Feb. 19. NMI Holdings reported a net loss of $10 million, or $0.17 per share, compared to a loss of $11 million, or $0.19 per share, in the same quarter a year ago. Fourth quarter revenue was $6.83 billion, compared to $2.1 billion a year ago.
The company also witnessed an increase in new insurance written to $1.7 billion, versus $158 million in the fourth quarter last year. CEO Bradley Shuster attributed the growth to “continued penetration and ramp of new lenders” and said “fully 26% of our flow volume in the quarter was generated from the customers who had not previously contributed flow NIW.”
Incorporated in 2011, NMI Holdings said in its quarterly SEC filing that it “currently differentiates itself from its competitors by underwriting all loans it insures either prior to or post close, which permits us to provide loan originators and aggregators with 12-month rescission relief protection, thereby giving our customers consistent confidence of coverage. We have the ability to write new business without the burden of risky legacy exposures.”
Kyle Bass (Trades, Portfolio), a macro investor at Hayman Capital Management, also holds a stake in the company worth 15.4% of his portfolio, or 5,496,500 shares. Bass first reported the holding in the fourth quarter of 2013 and has not reported trading in the company’s shares since.
NMI Holdings also has a P/B ratio of 0.99 and P/S ratio of 19.6, both of which are near a two-year low.
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