Aegis Value Fund on Radian Group Inc.
Thesis
Radian was Aegis's largest purchase in the first half, acquired at roughly book value and about 7-8 times earnings. The fund sees that valuation as unusually low given Radian's record $280 billion mortgage-insurance book, strong credit quality and excess capital above regulatory requirements. Reinsurance transfers part of the tail risk and helps protect the balance sheet against a severe mortgage-credit downturn. Aegis also views the Inigo specialty-insurance acquisition as a reasonably priced diversification into higher-margin business that the market has not fully appreciated.
“As of mid-year, Radian shares represented 2.66 percent of Fund assets.”
Key risks
- A severe deterioration in mortgage credit
- Execution and integration risk from the Inigo acquisition