- Q2 earnings key takeaways for financials are that many growth-oriented stocks are fairly valued or overvalued, while value-oriented stocks appear attractive, says BTIG analyst Mark Palmer.
- Municipal bond insurers and private mortgage insurers are "looking particularly inexpensive relative to their inherent values and near-term prospects," Palmer wrote.
- Municipal bond insurers: Q2 earnings season was a "highly consequential period for municipal bond insurers Ambac Financial Group (AMBC), Assured Guaranty (AGO +0.7%), and MBIA (MBI +0.6%).
- More significant, though, are settlements and court rulings that occurred after the end of the quarter, most notably the Cofina pact reached on Aug. 8, 2018.
- "If the COFINA settlement were to be consummated and a new PREPA deal is forged, the impact on the bond insurers in terms of improving their risk profiles would be dramatic," Palmer says.
- For private mortgage insurers, each of the five companies that BTIG follows--Essent Group (ESNT), MGIC Investment (MTG -0.8%), Radian Group (RDN -0.6%), NMI Holdings (NMIH -0.5%), and Genworth Financial (GNW +2.1%)--beat consensus estimates and their conference calls were upbeat.
- Industry pricing has stabilized, fears of Freddie and Fannie encroachment on mortgage insurance "appears overblown," and the possibility of a government pullback from mortgage insurance seems more likely. As a result, Palmer believes private mortgage insurers' "share price rebound is likely to have legs."
- Previously: Bond insurers Ambac, Assured Guaranty, MBI gain on Cofina deal (Aug. 9)
- Now read: Ambac Financial 2018 Q2 - Results - Earnings Call Slides
Original article