Pay special attention to today’s Top Pick: it comes from George Putnam, Editor of The Turnaround Letter, who picked the best-performing Top Pick of 2012. His 2012 Top Pick, OfficeMax (OMX), rose 110% from when he recommended it in the Investment Digest to the end of 2012. Here’s his new turnaround idea for this year.
“Our Top Pick for 2013 is MGIC Investment Corp. (MTG, $3), the leading non-governmental provider of mortgage insurance. The company was battered by losses from the subprime mortgage debacle prior to 2008. Those losses are now receding; the company has raised additional capital; and the new business that it is writing is very profitable.
“MGIC recently settled a long-festering dispute with Freddie Mac, thereby allowing it to continue to insure Freddie Mac mortgages. The budding recovery in the housing market helps MGIC in two ways. First, the rise in home prices makes it less likely that homeowners with older policies from MGIC will default. Second, an increase in home purchases provides MGIC the opportunity to write more new business at very profitable rates. There is still some risk that MGIC’s pre-2008 business will cause regulatory problems, but we believe that risk is small compared to the substantial gain potential in the stock as the housing sector continues to recover. Disclosure Note: Accounts managed by an affiliate of the Publisher of The Turnaround Letter own MGIC stock.”
- George Putnam, The Turnaround Letter, December 28, 2012