Kyle Bass (Trades, Portfolio) of Hayman Capital Management has reported an increase in his stake in NMI Holdings Inc. (NMIH, Financial). Bass is the founder and lead portfolio manager of Hayman Capital Management, which he founded in 2006. Bass’ portfolio is primarily focused in the real estate market, and he is well known for his ability to identify real estate market mispricings. Most notably, Bass is known for his substantial investment gains obtained from the use of synthetic credit securities utilized during the subprime mortgage crisis.
As an investor in the real estate equity market Bass’ portfolio is heavily skewed towards equity real estate investments. His most recent purchase of NMI Holdings is on point with his overall portfolio focus of investing in real estate. Bass first added NMI Holdings to his portfolio in the fourth quarter of 2013 when the company first became publicly traded.
NMI Holdings operates in a niche part of the mortgage market. Its business is focused on providing mortgage insurance policies which help detail the strength of individual mortgage loans. The company is licensed in all 50 states and also provides loans to Freddie Mac and Fannie Mae for securitized investments.
On Aug. 4 NMI Holdings released its second quarter earnings results. For the second quarter the company reported strong total revenue of $10.9 million up 206% from the comparable quarter. Revenue was on point with analysts’ estimates however earnings per share missed estimates by $0.03. For the second quarter NMI Holdings reported earnings per share of -$0.18 from earnings of -$10.4 million.
In the second quarter the company showed its ability to generate revenue from its core business. In Net Premiums Written the company improved revenue 303% from the comparable quarter. Revenue was also up 225% in Net Premiums Written for the first half of the year. In the second half of the year operating expenses and insurance claim payouts should be a key area of focus for investors.
In NMI Holdings’ second quarter earnings comments the company reported an increase in its expectation for total net insurance written in the second half of the year resulting in a slightly higher revenue growth estimate for the full year of 2015. Management reported that it expects net insurance written to increase to $10 billion to $11 billion for the full year 2015. Previous guidance had reported net insurance written for the year of $6 billion to $7 billion.
In the day following the announcement NMI Holdings’ stock price increased 6.31% to close for the August 5 trading day at $8.26. Given the increased sales growth projections overall the stock appears to have an improved fair value of approximately $8.95.
Bass’ NMI Holdings stock buy in came on Aug. 5, in the trading day following the company’s earnings announcement. On Aug. 5 Bass bought 1,875,000 shares of NMI Holdings increasing his portfolio position in the stock to 65.8%. Prior to the Aug. 5 purchase NMI Holdings accounted for 56.6% of the portfolio. At 7,371,500 shares Bass’ Hayman Capital Management currently owns 12.56% of the company’s outstanding equity shares.
