MGIC Shares Surged: What You Need to Know

Before you go, we thought you'd like these...
Before you go close icon

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of mortgage insurer MGIC Investment (NYS: MTG) were shooting skyward today, gaining as much as 20% in intraday trading on news that a big investor had stepped in.

So what: Hayman Capital Management, run by J. Kyle Bass, disclosed a 4.9% stake in MGIC. Why is that so notable? Because Bass had bet against the housing market before it imploded. The new stake is a vote of confidence in a company that's at the center of the downtrodden housing market and has seen its stock get pummeled.

 Now what: A move like this from a sharp investor is no doubt notable, and for investors on the sidelines it could be a reason to take a closer look at the MGIC story.

However, we've been here with this same industry and this same story, and it didn't work out so well for piggybacking investors. What I'm talking about is John Paulson's bet last year on fellow mortgage insurer PMI Group (NYS: PMI) . Investors got fired up when he jumped in, but today the stock is down big and the company is basically the walking dead.

This doesn't mean that the same fate will befall MGIC, but it's important to remember that having a hotshot investor stepping in is never a guarantee of success.

Want to keep up to date on these companies?

At the time this article was published Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributorMatt Koppenhefferhas no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting hisCAPS portfolio, or you can follow Matt on Twitter,@KoppTheFool, or onFacebook. The Fool'sdisclosure policyprefers dividends over a sharp stick in the eye.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners