Stock Contest for class

[whyherro]

Buy WCI, put an order in for TOL at $20.

[pig4bill]

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I've been looking at a stock TGIC, Triad Guaranty. Mortgage insurer that is way down from its 52 week high, (private mortgage insurance company). Looks as if its market capitalization is close to its investment bonds and cash - liabilities. I may be missing something here but it looks like a good buy. If I'm way off base here, I'd like to see how.

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Mortgage insurance?? You have been watching the news, right? Mortgage companies blowing up left and right? Better check their exposure.

Nightmare scenario: An alt-a or subprime borrower gets a 100% mortgage for 400 grand. They've paid it down to $399,000 but now the payments adjust 33% higher and defaults. The house drops 25% in value and nobody is buying at that price. The mortgage insurer is on the hook for 80 grand.

The find-a-bridge-to-jump-off-of scenario: Some mortgage insurers also did securitizations of mortgage-backed packages of securities. Now it turns out some of those packages were made up of real garbage. So bad that nobody was buying when they were offered for 40 cents on the dollar. Some of the packages are huge (billions of dollars). Make sure they have little or no exposure to that.