NMI Holdings (NMIH)

NMI Holdings (NMIH) is a mortgage insurance company. While that seems like a rather unexciting line of business, the company’s stock is anything but boring.

NMIH is somewhat unusual in that it is both a growth stock and value stock. The company has improved its earnings for every year for the last 10 years. Few companies can make that claim. For perspective, almost all the big glamour stocks (Microsoft, Apple, NVIDIA, Amazon, Meta and Tesla) have had a couple of declining earnings years over the same time period. Alphabet (GOOG) has had one.

It is not easy to improve earnings 10 years in a row. Most companies that experience stellar growth have a low earnings yield (trailing 12 months earnings per share / stock price) because investors are willing to pay up for that stable growth. When the price of the stock goes up, its earnings yield goes down.

But that is not the case here. Perhaps this is due to NMI Holdings “old school” line of business. NMIH’s earnings yield is currently an attractive 12.45%. A high earnings yield like that is usually a sign that investors are expecting a decline in earnings. But that does not appear to be the case anytime soon. Analysts are still expecting earnings growth to continue for at least another couple of years. Perhaps it is just a situation of investors having a myopic focus on tech and not being too interested in anything else.

But the stock can move. NMIH had a 700% move during 2016-2020 and a separate 177% move during 2020-2022. NMIH is currently up 99% from its 2022 low which is more than Alphabet (+81%), Tesla (+58%) and Apple (+34%).

In summary, buying NMIH provides diversification from tech yet also offers the tantalizing possibility of tech-like outsized returns.
Partial SELL BILS (22.1% of the current BILS position).

This will result in changing the BILS allocation in the Intrinsic Value Equity Model from 32.4% to 25.24%.

BUY NMIH. The dollar amount should be 6.66% worth of the Intrinsic Value Equity Model. This will result in the Intrinsic Value Equity Model changing its NMIH allocation from 0% to 6.66%.
Neil Jesani CFP, Andrew Constantinides IAR, Jacob McCue CFA, Michael Foulkes, Christopher Rose, Nikhil Khandelwal CFA, Sofiya Shoiab Esq.
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