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I have 21 consecutive profitable trades of 15% or better. How is this possible? Every day there are hundreds of stocks setting new highs, no matter what happens in the overall market. Many of these stocks are still at very reasonable valuations. Afraid of buying stocks at their highs? Think of it this way: a new high is really a future floor for companies with solid financial underpinnings. Quantitative momentum modeling makes it easy to identify stocks that can continue this upward momentum trend. Why does this happen? It's really very simple..ask me about what investors and cows have in common. I am $$$ MR. MARKET $$$. I AM HUGE!!! Bring me your finest meats and cheeses. You can join in on the fun. Register for free and you'll be able to post messages on this forum and also receive emails when $$$ MR. MARKET $$$ makes his own trades. ($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
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  1. #1

    Default ESNT ==> The Chambers Street Winner!

    ($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)

    Someone once said that owning a home was the American dream. Now I have dreamt about a lot of other things and owning a home wasn’t really one of them. I do own a home, but it wasn’t because I dreamt about it. Having said all that, people still say that home ownership is the American dream. When I see all the shit I have to fix in my house sometimes I wonder. Anyway, let’s assume that everyone wants to own a home. Well, not everyone can afford to own a home outright. That’s where the banks come in. The bank will lend you money and use your home as collateral. Great idea, right? Well the bank needs to have some assurance that their loan will be repaid. One would think that they do all kinds of research so that they only lend money to credit worthy people. Actually that’s not exactly true. If someone can only afford a small downpayment on a home, the bank will require that the borrower get Private Mortgage Insurance. That’s right, the lender isn’t even paying for the insurance to protect itself. They make the borrower do it. That is a colossal ripoff.

    PMI (Private Mortgage Insurance) is the biggest ripoff in real estate... but not necessarily for the reason you'd think. PMI itself makes sense. If you can't pay for a standard 20% down payment, your bank will make you pay for PMI to insure their loan against default. So, PMI is a reasonable concept overall, but it's still a huge ripoff. Typically a lender will require you to buy PMI if you put down less than the traditional 20%.

    If you’re buying a home, lenders require PMI as part of a conventional loan to protect them in case you end up in foreclosure. The insurance protects the lender for at least some of the shortfall if the home is sold in foreclosure for less than the outstanding amount of the mortgage. The good news is that having PMI can help you qualify for a mortgage if you otherwise couldn’t — especially if you don’t have a 20 percent down payment.

    So remember the movie “The Big Short” when strippers were buying houses on credit and flipping the houses for speculative profit using the bank’s money? Our government put a stop to these bad lending practices, which made it tougher for people to get loans. Only people with triple A credit were getting loans, which really hurt the housing market. This propagated the incredible ascension of the PMI business since the credit crunch of 2009. Given the large gap between current restrictive credit standards and the reasonable standards of the early 2000s, this would be positive for the PMI industry.

    2017 marks the 60th anniversary of the birth of the modern private mortgage insurance (PMI) industry. Although the industry’s roots go back to the pre-Depression era, it has existed in its current form since 1957, when Mortgage Guaranty Insurance Corporation (MGIC), the first PMI firm, was founded. Mortgage Guaranty Insurance Corporation was so successful that the PMI market soon attracted new entrants and the industry flourished. Private mortgage insurance ballooned from $0.3 billion in 1960 to $63 billion by the late 1970s. The PMI industry has continued growing in recent decades and has made it possible for millions of households to become homeowners. As the housing market has improved and house prices have recovered, private mortgage insurers have seen their market share and profits recover gradually. The availability of appropriately structured PMI coverage could give lenders who have pulled back from FHA lending a viable alternative.

    Today I bought stock in Essent Group Ltd. (ESNT) at 48.91. I will sell it in 4 to 6 weeks at 56.73. Here’s why I like ESNT:

    Well it all starts off with the chart and this stock is on a recent march that appears to be unstoppable:



    This stock is up 54% in only the last 6 months yet its PE is a ridiculously low 9.9. That’s incredibly cheap for this kind of stock price ascent.

    Essent Group Ltd., through its subsidiaries, provides private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. The company also provides information technology maintenance and development services; customer support-related services; and contract underwriting services. It serves the originators of residential mortgage loans, such as regulated depository institutions, mortgage banks, credit unions, and other lenders. Essent maintains relationships with 1,360 originators of residential mortgage loans and depository institutions (chiefly banks and credit unions) that hold mortgage loans.

    What’s so great about Essent? Essent’s loan losses are very low compared to its peers. Its investment portfolio is 99.6% investment grade. Since interest rates are about as low as they can go, an increase in interest rates means that houses will be less affordable to the fringe buyer, meaning PMI demand will increase. Essent’s strength is derived from its strong capital position, consistent best-in-class customer service, and collaborative approach to building long-term business relationships.

    ANAL-ysts have been pumping ESNT with upward earnings estimate revisions. The Zacks Consensus Estimate for its current-year earnings has been revised 1.5% upward over the past 60 days. Why the optimism?


    • Earnings per Share Growth: In the last three-five years, Essent Group witnessed earnings per share (EPS) growth of 42.9%, higher than the industry average of 13.6%. The uptrend is likely to continue in the near term, which can be seen from its projected earnings growth rate of 9.3% for 2019 as well as 2020. The company’s long-term (three-five years) estimated EPS growth rate is 10%. That means that its EPS growth projection actually EXCEEDS its PE ratio. Wow! This is an incredible value.
    • Strong Leverage: Essent Group’s debt/equity ratio, which stands at 0.00, indicates that the company uses no debt to finance its operations. The industry’s debt/equity ratio stands at 0.66. This reflects the company’s financial stability, even amid adverse economic conditions.
    • Superior Return on Equity (ROE): Essent Group has an ROE of 21.36% compared with the industry average of 13.05%. This indicates that the company reinvests its cash more efficiently compared with its peers.

    All of this great news was recently reflected in the company’s last earnings quarter:

    • Insurance in force as of March 31, 2019 was $143.2 billion, compared to $137.7 billion as of December 31, 2018 and $115.3 billion as of March 31, 2018.
    • Net premiums earned for the first quarter were $177.8 million, compared to $173.3 million in the fourth quarter of 2018 and $152.6 million in the first quarter of 2018.
    • The percentage of loans in default as of March 31, 2019 was 0.65%, compared to 0.66% as of December 31, 2018 and 0.86% as of March 31, 2018.


    In February, Essent Guaranty, Inc. obtained $473.2 million of excess of loss reinsurance coverage on mortgage insurance policies written by Essent in 2018. The reinsurance is fully collateralized by ten-year mortgage insurance-linked notes (“ILNs”) issued by Radnor Re 2019-1 Ltd., an unaffiliated special purpose insurer. This keeps the company very safe against an unusual event of excessive claims.

    Here’s what the boss had to say about his company:

    “We were pleased with our strong financial results for the first quarter as our operating environment remains favorable and credit continues to perform well,” said Mark Casale, Chairman and Chief Executive Officer. Our outlook on our business and housing remains positive and we continue to believe that we are well positioned to continue growing our company.”

    Hey…at a PE of less than 10, how can I go wrong? I am all over this like flies on poop and I will laugh ha ha ha ha ha when I take it to the pay window. I am HUGE!

    $$$MR. MARKET$$$
    =============================

    I am HUGE! Bring me your finest meats and cheeses.

    - $$$MR. MARKET$$$

  2. #2
    Join Date
    Oct 2003
    Location
    Hamilton MA
    Posts
    2,438

    Default

    Well at least you said poop. Good write-up and good luck.

  3. #3
    Join Date
    Jun 2019
    Posts
    1

    Default

    Thank you sir! What a great write-up. I'm in with you!.. Well, not in the poop. But in the cheese!

  4. #4
    Join Date
    Sep 2003
    Posts
    4,766

    Default

    Great writeup, and a solid pick, $$MM!! This one is going to $57 for sure.... so of course, I'm in with you at 49.2!

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