Michael Simpson, CFA Genworth MI Canada Inc. MIC-T COMMENT Jul 04, 2019

They just reported, and increased their dividend significantly again. The share price drop kind of puzzled him. It may have been a bit of an indictment, with the federal government and regulators saying that they were worried about the Canadian mortgage market. People may have sold down their shares on that news. Feels there will be a slowdown in Canadian housing, which will slow down the number of mortgages written, and thus the number of mortgages insured. The share price could go down further, and this is a company he would be looking at. Dividend yield of 5.8%.

This is in a bit of a tug-of-war. CHMC has always been the dominant incumbent mortgage insurer. Given political concerns about elevated risks on housing, the government has been trying to offload some of their balance sheet risks and limiting mortgages, and that has accrued to the benefit of companies like this. It has a reasonably strong credit and bonds are BBB rated. The stock is trading below BV. A respectable yield. This is too fraught with risk for him to get all that enthusiastic at this stage.

It has been pounded down along with everything else. You are playing that the real estate market is not going to collapse. See Top Picks.

There has been a cloud over anybody in the mortgage business. This one is a little different. They are a mortgage reinsurer, but they don’t insure Alt A or subprime mortgages. They also have the ability to push back an underwriter if there was fraud. Trades at 6.4X Price to Free Cash Flow with a double-digit return on equity and 8X PE. Dividend yield of 5%. (Analysts’ price target is $37.50.)

(A Top Pick Jun 28/17, Up 30%) This is the non-bank financial that he likes a lot. They do not insure high risk mortgages and this was an issue with Home Capital and it caused the stock to sell off at the time he recommended this one. It is still cheap overall with a PE of 9 times. It has a solid balance sheet, and he still likes it. The concerns that kept it cheap are now behind them.

A mortgage insurer. The company is well run. They have done a good job at being conservative on their assumptions and he feels they have been attracting higher quality borrowers.

IGM-T vs. MIC-T. He would prefer MIC-T. He likes the underlying fundamentals, but has always worried about a real estate downturn and how it would affect it. He prefers it to IGM-T where he does not see how the fee structure would be sustainable in the long run.