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Super Star Pick of the Day - PMI

March 31 , 2010

MNI - PMI Group Inc

What is hot recently? As we said that it is not from Solar Group, it is not from Gold Sector. Even AAPL is not our top choice. Then what is it?

The answer may surprise you: It is Mortgage and Title Insurers. All major mortgage insurers incurred huge loses last quarter. But if you bet that the stocks in this sector will get hit after earning reports, you are wrong. The leading stocks in this sector have been the hottest recently.

The reason: Market is forward looking. The market believe that the worst is over and good days are ahead of them as housing prices have stabilized after four years of huge declines; government and major banks are willing to reduce the mortgage principals by as much as 30% for certain home owners; and home loan defaults will drop by big numbers.

Recently released data further confirmed market expectations. For example, Data released today by Mortgage Insurance Companies of America, an industry group, showed that there were 68,675 primary insurance defaults in February, down sharply from 98,685 in January. The industry group also added that so-called cures, which measure loan problems that have been resolved, were 80,758 in February, up from 61,195 the previous month. Stocks in this group got another boost today.

Leading stocks in this sector include RDN, MTG, GNW and PMI. Our Portfolio owned RDN, MBI and PMI at different times and currently has PMI as one of our major holdings.

Our buy prices are $2.25 and $2.59 respectively and all gained over 100% in less than two months. As we said many times, identifying hot stocks is much more important than predicting near term market trend. You want to beat the market in big ways, then you need to do your homework to find out good stocks to own. See the Chart:

Want to know other hot sectors and hot stocks other than Mortgage insurers? Only we can tell you.

 

   
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