Genworth MI Canada Inc. (MIC-T)

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.

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.

(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.

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.)

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.

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.

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%.

He bought it after the change in mortgage rules. They are the second largest provider of mortgage insurance. He thinks there will be no housing bubble crash. The risk reward for the 6% dividend yield is much more to the upside. They will be fine if employment in Canada does not go down.

The largest independent mortgage insurance provider. The stock had a big drop today. Part of the concern of the street is that Ottawa is asking some of the lenders to bear part of the risk, particularly on certain mortgage sizes. He has not been particularly interested in this name.

A value stock, but that has been the case for many years, and has been somewhat of a value trap despite management’s decent execution. This is not a growth business anymore. If you are concerned about Canadian real estate, this is definitely a name to be concerned about. As well, they have exposure to Western Canada, and how that is going to impact their results. 5.1% dividend yield should be safe.

A default mortgage insurance broker. The chart on this shows lower highs and forming a descending triangle. It is now breaking below this pattern, which is actually bearish because it has broken support. If you are betting on this, you are betting on the housing market in Canada as being strong. There are a lot of questions around that right now.

Default mortgage insurance providers. Likes the dividend yield of 5.66%. Cheap on a PE basis at about 8X. Also, trading below BV. There is a large Short position on this, which could result in a very nice upside as the Shorts are focusing too much on the valuation of the housing market. There are definitely pockets in Toronto and Vancouver, but doesn’t feel this is a problem for this company.