Whoa! These 3 Stocks Thrive in Sequestration: MGIC Investment Corp. (MTG), Cree, Inc. (CREE)

Since sequestration kicked in on Saturday and The End of The World As We Know It was supposed to materialize, the Dow Jones Industrial Average has packed on an additional 164 points, an almost 1.2% jump from where it closed on Friday. It was up 126 points yesterday alone and pushed the index to a new five-year high.

Had we known massive spending cuts would generate such market enthusiasm, we could have allowed sequestration to begin when it was supposed to at the start of the new year.

MGIC Investment Corp. (NYSE:MTG)

The three stocks below, however, had their own causes to celebrate, but resist the urge to high-five everyone in the cubicles next to you. Smart investors won’t celebrate until they know why their stock surged, because without a fundamental basis for the bounce, these stocks could just as quickly make the return trip down.

Company % Gain
MGIC Investment Corp.(NYSE:MTG) 27.8%
Dyax Corp. (NASDAQ:DYAX) 19.6%
Cree, Inc. (NASDAQ:CREE) 14.4%

Insuring housing’s future
They were some of the biggest casualties of the housing market implosion, but today, mortgage insurers are the market darlings, the epitome of the industry’s nascent recovery, and its potential as the government scales back its dominance of the mortgage industry. Both MGIC Investment Corp. (NYSE:MTG) and Radian Group Inc (NYSE:RDN) have soared in value over the past week with the former more than doubling in price and the latter up a not-so-insignificant 24%.

Both companies have used the opportunity to raise more cash. Radian started the funding cycle by raising $689 million selling stock and notes while MGIC followed with a dual set of announcements that it would float 135 million shares of common stock and $350 million in convertible notes that come due in 2020.