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5 Small Caps That Hedge Funds Love

A look at the potential boomer stocks favored by the 'smart money'

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#2: MGIC Investment

MGICinvestment185Change in investment from last quarter: +$84.2 million
Total hedge fund investment vs. market cap:
$84.2 million of $2 billion
YTD returns: 128%

MGIC Investment (MTG) is a private mortgage insurer that has gone gangbusters in 2013 along with a resurgent housing market. The company backs up loans for borrowers who can’t put down a lot of money on their home until there’s enough equity in the house to cover the cost of a bad mortgage should the borrower default.

These are typically FHA loans, since MGIC is the largest mortgage insurer for Freddie Mac and sister mortgage-financing company Fannie Mae.

With brisk homebuying lately and a drop in bad mortgages, MGIC is in the right place at the right time. Of course, like Caesars, this is a company that is having trouble turning a profit right now, so buyers should beware of expecting too much after a big run and a lack of earnings — even if the business is looking up.

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