MGIC Investment Corporation (NYSE:MTG) closed at $27.12 on October 13. The stock is close to where it stood six months ago, compared to a 21.5% return for the Insider Monkey Billionaire Index and 14.0% for State Street SPDR S&P 500 ETF Trust.
MGIC sells insurance to mortgage lenders rather than to homeowners. When a buyer puts down less than a fifth of the price, the lender usually wants protection. MGIC charges a premium and covers the loss if that borrower stops paying.
It is a quietly unusual business. The premiums keep arriving on loans written years ago, and the claims mostly arrive when borrowers lose their income. For most of the past decade very few of them have.
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One of the Best Margins You Will Find Anywhere:
Operating margin is 80.85%. Out of every dollar of revenue, roughly four fifths survives as operating profit. Very few businesses in any industry are built to run that way.
Part of the reason is that the costs barely move. Premiums arrive on policies written years ago and no new selling is needed to collect them. What mostly decides profit is whether claims come in.
There is also very little borrowing. Debt is 12.90% of equity, which is a small fraction of what the mortgage trusts beside it in our 10 Best Mortgage Finance Stocks To Buy According to Billionaires carry. To see how differently these companies are built, click HERE.
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The Top Line Is Going the Wrong Way:
Revenue fell 2.90% in the most recent quarter. High mortgage rates mean fewer new loans, and fewer new loans mean fewer new policies. The book of existing business keeps paying, but it is not being replaced fast enough.
Earnings fell 5.40% over the same stretch, which is faster than revenue. That can happen easily in a business with largely fixed costs. Either way it means the margin is not expanding, whatever the headline level suggests.
Then there is the thing nobody can forecast. Mortgage insurance is highly profitable while employment holds up and much less so when it does not. The last decade has been unusually kind on that front and kindness is not a strategy.
A Single-Digit Multiple With a Reason Attached:
The shares trade at 9.15 times the past year and 8.68 times what analysts expect next year. For a business with these margins that looks like an obvious bargain. The market is not confused, though. It is pricing a shrinking book and the possibility of a worse claims cycle.
Price to book is 1.20, so you pay a premium to the accounting value. The two readings pull against each other. A low multiple on earnings beside a premium on assets is the market hedging its own view.
Conclusion:
MGIC keeps an extraordinary share of its revenue as profit and borrows almost nothing to do it. The problem is that the revenue is shrinking and the earnings are shrinking faster still. A low multiple on a business going backwards is not the same as a bargain. The question worth answering is whether high mortgage rates are a pause in new policy writing or the new normal, because the answer decides whether this multiple is generous or merely fair.
Market Sentiment:
MGIC Investment Corporation was held by 35 hedge funds with a combined stake value of about $550 million at the end of Q2 2026 in the Insider Monkey database. This is up from 31 hedge fund holders with a cumulative investment value of around $530 million in the previous quarter.
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This article is originally published at Insider Monkey.
