GO
Loading...

Cramer: Amid Pullback Look for Entry

Tuesday, 4 Jun 2013 | 6:15 PM ET
RDN: Taking Advantage of Hot Housing
Tuesday, 4 Jun 2013 | 6:15 PM ET
On a down day, Cramer hunts for names that may be on the verge of greatness. The housing recovery could be one of the strongest themes in the market, he says, and it's in its early stages. With S.A. Ibrahim, Radian Group CEO.

(Click for video linked to a searchable transcript of this Mad Money topic)

Cramer is often a buyer of weakness. And he thinks as this stock pulls back, investors should look for an entry point.

"I'm talking about Radian," said the Mad Money host. "I'm a huge fan."

Cramer believes the renaissance in the US housing market is an investable theme for the long-term. And when the market sells off broadly, Cramer believes its prudent to revisit favorite themes, to see if the recent decline presents opportunity.

Although Cramer has talked about dozens of housing-related plays on Mad Money, among his absolute favorites is Radian Group, the largest private sector mortgage insurer in America.

Adam Jeffery | CNBC

"As people take out mortgages to buy new homes, they're also required to pay for mortgage insurance, which pays back the bank in case the borrower happens to default," Cramer explained. Radian provides this kind of 'insurance policy.'

Although that was a terrible business only a few years back, the environment has changed dramatically.

"These days banks are only lending to the most creditworthy customers, with very high FICO scores. Therefore I believe it's very unlikely that Radian will have to pay out on the policies it's been writing lately," Cramer said.

-------------------------------------------------------
Read More from Mad Money with Jim Cramer
Cramer: Out with the New, In with the Old?!!
Cramer's 2-In-1 Takeover And Break-Up Play
Are Energy Bulls in Trouble?
-------------------------------------------------------

But that's not the only reason Cramer likes this stock; he also thinks Radian is about to win more business - a lot more.

"The biggest player in the mortgage insurance market is the Federal Housing Authority. They're a government agency and they've decided to dramatically ratchet down their exposure. Therefore Radian will face less competition in the future. And the dynamic is shifting as demand for housing is heating up," Cramer said.

Of course some issues from the housing crisis remain, however Cramer believes the company has them well under control.

"At this point about half of the company's business was originated in 2009 or later," he said. "In other words Radian has already divested a large number of older mortgages which may be problematic.

All told, Cramer believes the fundamentals are strong. Therefore, when the stock sells off Cramer thinks about buying.

"The housing recovery remains one of the strongest themes out there and it's still in early stages," Cramer said. I think one of the best ways to benefit from the theme is with Radian. After today's shellacking, this could be a terrific entry point."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

  Price   Change %Change
RDN
---

Contact Mad Money

  • Showtimes

    Monday - Friday 6p ET
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.