Radian Group, Inc. (NYSE:RDN)

Really easy one. They are in a financial guaranty and PMI business that has generated fantastic returns over the past 10 years. Marty Whitman a big proponent of the firm. They have grown NAV at a rate of 17% / year for the past 10 years. Their current NAV is $42. Assuming a conservative NAV growth of 10% over the next 5 years we arrive at a NAV of $67 per share. Will trade at 1.5x book sometime over the next 5 years assuming they are healthy and a positive outlook during that time. If NAV stays unchanged from right now in 5 years trading at 1.5x book they are worth $60 / share. This is business is worth somewhere between $60 - $90 per share.

5 year sell target $60 minimum. If NAV is $50 then $75. If NAV is $60+ then $90.

EVEN WITH SUBSTANTIAL WRITE-DOWNS, THIS STOCK PRICE IS SO FAR BELOW IT'S BOOK VALUE THAT THERE IS A LARGE CUSHION AGAINST FURTHER BAD NEWS. INSIDERS ARE ALSO BUYING.

Getting whacked 70% off of it's trading price earlier this summer, Radian is one of the few solid mortgage insurers who should be able to weather this credit storm. They still have cash, a solid balance sheet, and another 20% slice off the top last week was an over-reaction. This is a great long-term buy at these prices.

Looking at the actual company (a mortgage insurer/credit enhancer), I don't see what's so endangered about their book value. Maybe I will, but I'll risk that, since they are <1% subprime. If you think their balance sheet is anywhere near as sound as I do, they don't need to turn a profit in the next two years in order to be a great investment at this price. Furthermore, they are still reporting positive cash flow (even though it dropped of sharply in the last quarter). They're repurchasing shares. I could write a song called "Stack 'em to the Heavens"! What more could you want?

way undervalue

Selling around half of book. Great deal.

the stock is way undervalued. clarification of the subprime situation can only make this stock run higher. based on past perrformance look for a 3 fold increase in 2 years

This is a value pick but I may be early.

The housing market will be a rolling tsunami that will slowly grind down their book value. Provided they can continue writing business without requiring a capital infusion (big if considering regulated leverage requirements), their book value should bottom out around $1 billion in 2 years (currently >$4 billion book value). As of today, market cap is $1 billion. If the market cap drops much lower than $1 billion I will consider buying (currently sitting on the sideline trying not to catch a falling knife).

It's one of these "if it doesn't go bankrupt..." stocks. It's difficult to conclude the probabilities of bankruptcy, but from my estimates, it seems that the market has already priced in the "fact" that 2 out of 3 of RDN's businesses are worth nothing. On this basis, I would say a long term investment is a good play at current levels.

It's going to be a tough couple of years but, if you look into the future, 2 things remain certain.
1) A more stable house market is better for mortgage insurance. We do not want LTV ratios going below the golden 80% too quickly.
2) This housing correction has shown the need for mortgage insurance.

The downside is, of course, that mortgage origination will be less and thus there will be less demand for mortgage insurance. Nonetheless, at current levels, I believe this stock is an outperform on expected return basis.

Great value play for those who can wait.

Lots of bad news depressed this stock, but its balance sheet is strong, even if you discount assets deeply to anticipate subprime losses.

Radian to rebound to $35-$40 per share by Christmas. Maybe back up to $60 per share in 18 months. Radian's business will now appear in lesser quantities selling to a market that has always been present. RDN may very well reenter into merger talks in 28 months after the real estate market has recovered and settled from this massive foreclosure wave.

Taking a chance here on a longshot that these guys might survive.

Getting sued by MGIC

No chance in hell

For the second quarter RDN reported net income of $21.1 million, or diluted per share of $0.26, compared to net income of $148.1 million a year ago, or $1.79 diluted per share

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