Essent Group Stock is a Potential Tenbagger
- Ishfaaq Peerally
- Mar 26, 2021
- 2 min read
๐ฎ As you know, I had a stock in my portfolio which was a Tenbagger recently, GameStop $GME . ๐ผ ๐ฉ๐๐ฃ๐๐๐๐๐๐ง ๐ข๐๐๐ฃ๐จ ๐ ๐จ๐ฉ๐ค๐๐ ๐ฉ๐๐๐ฉ ๐๐๐ฃ ๐๐๐๐ฃ ๐ต๐ฌ๐ฌ% ๐ค๐ง ๐ข๐ค๐ง๐ ๐๐ฃ ๐ญ๐ฌ ๐ฎ๐๐๐ง๐จ ๐ค๐ง ๐ก๐๐จ๐จ. If you're going to read my initial analysis of GameStop from September 2019, the expected returns were only 35% in a year. Even when I saw the inevitable short squeeze, I only said that it could gain 500%. But I always knew that it could be a tenbagger or more. The expected returns are always after taking a margin of safety and I like being conservative.
๐ Even my analysis of Essent Group $ESNT is pretty conservative but when we look at the best case scenario, ๐๐ฉ ๐๐จ ๐ ๐ฅ๐ค๐ฉ๐๐ฃ๐ฉ๐๐๐ก ๐ฉ๐๐ฃ๐๐๐๐๐๐ง. It is not going to be like GameStop, gaining so much in a short period of time but if it can gain 900% in 10 years, it is a tenbagger, and I think that it is possible.
๐ Essent Group is one of the ๐๐ง๐๐ซ๐๐ฉ๐ ๐๐ค๐ง๐ฉ๐๐๐๐ ๐๐ฃ๐จ๐ช๐ง๐๐ฃ๐๐ (PMI) businesses and its 2020 market share of net insurance written was the second largest in the industry. We have record low mortgage rates, the work from home trend, asset price inflation and all of this is causing higher demand for housing and consequently for mortgages.
๐ธ New Insurance Written, Insurance In Force, Net income, the investment portfolio and book value have ๐๐ก๐ก ๐๐๐๐ฃ ๐๐ง๐ค๐ฌ๐๐ฃ๐ ๐๐ฎ ๐ค๐ซ๐๐ง ๐ฎ๐ฑ% ๐๐ฃ๐ฃ๐ช๐๐ก๐ก๐ฎ in the last 5 years.
๐ฐ Even in a ๐๐ค๐ฃ๐จ๐๐ง๐ซ๐๐ฉ๐๐ซ๐ ๐ซ๐๐ก๐ช๐๐ฉ๐๐ค๐ฃ ๐๐ฃ๐๐ก๐ฎ๐จ๐๐จ where we use a 15% growth for the book value, the expected annual returns is over 25%, meaning it is a potential tenbagger. We didn't take into consideration the fact that Essent Group can increase their dividends or buyback shares.
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