Trade Log (RDN)

Date: 4/9/13

Action: Bought 50 Shares of Radian (RDN)

Industry: Mortgage Insurance

Subsequent buy: Yes, bought 50 more shares on 5/2/13

Reasons:

Macro:

This industry has seen the worst times from 2007 to 2011 during which the mortgage crisis occurred. Many of these insurers took a big hit as defaults from subprime mortgages and mortgage back securities began increase. Companies such as AIG saw themselves in the middle of the controversy of backlash against wall street institutions and the government bailouts at that time. As you can see the analysts have trended towards overweight and buy ratings.

02-May-13 Reiterated FBR Capital Mkt Perform $8 → $13
05-Mar-13 Upgrade Barclays Underweight → Overweight $4 → $14
12-Feb-13 Reiterated FBR Capital Mkt Perform $6 → $8
02-Nov-12 Reiterated FBR Capital Mkt Perform $3 → $6
03-May-12 Reiterated FBR Capital Mkt Perform $5 → $3
02-May-12 Reiterated Compass Point Neutral $5 → $3
23-May-11 Initiated Compass Point Buy $6
14-Jul-10 Reiterated Barclays Capital Underweight $18 → $10
07-May-10 Reiterated FBR Capital Mkt Perform $10 → $12
18-Mar-10 Reiterated Northland Securities Outperform $10.25 → $14
10-Mar-10 Upgrade Piper Jaffray Underweight → Neutral $9
14-Nov-08 Initiated Barclays Capital Underweight $4
20-Jun-08 Reiterated UBS Neutral $7 → $3
13-May-08 Reiterated Friedman Billings Mkt Perform $7 → $6
07-Apr-08 Reiterated UBS Neutral $9 → $7
19-Feb-08 Reiterated Friedman Billings Mkt Perform $15 → $10
17-Dec-07 Downgrade Citigroup Hold → Sell
06-Nov-07 Reiterated UBS Neutral $21 → $10
02-Nov-07 Reiterated Friedman Billings Mkt Perform $26 → $15
20-Sep-07 Reiterated Friedman Billings Mkt Perform $23 → $26

Technical:

Radian charts show an incredible decline beginning mid 2007 to mid 2009, followed by a bounce back in the subsequent year and then a second decline. Recently it has seen steady to substancial growth in its stock. In the past two years its stock has increased in price from around $5 to about $13.

Strategy:

Long Term with option income.

After analyzing the company’s financials, I have determined it is in “investable” position for long term (1yr+). The industry and market in general have been doing well in the past 2 years. While I hold on to the stock, I plan on selling call options 3 months with a strike price 15% above the price at the time of option sale.

Minimizing risk:

In the case of a decline, I will be committed my 100 shares as a result of the call option sales. To minimize the downside risk, I plan to buy put options every 3 months at a strike price 5-10% below the price of the stock at the time of option purchase.

http://finance.yahoo.com/q?s=RDN

http://www.finviz.com/quote.ashx?t=RDN&ty=c&ta=0&p=m

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