Mortgage insurers like MGIC Investment MTG and PMI Group PMI were down about 10% with an hour left in trading on Tuesday. Cramer said these stocks “give the appearance of going down every day.”
That shouldn’t come as much of a surprise after a Lehman Brothers report saying, “credit is clearly unraveling,” “delinquent loans are worrisome” and “the estimates are for big losses.”
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“These companies are on the ropes,” Cramer said.
MGIC and PMI have “sliced through their book value,” which is usually a bottom for these stocks because they’re supposed to be cash. Now with lowered earnings, they’re expensive on a multiple basis.
Cramer’s solution? These companies need to issue equity.
Cramer also admitted his latest buy call on Coach was off. COH just reported a disappointing quarter. “Something’s wrong,” Cramer said, and the blame can’t be placed on sectorwide problems in the retail.
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