Stewart Information Services: A few degrees removed

If you think back to the glory days of investing (circa 1999), you'll remember how investors morphed their philosophy to fit their dreams of infinite Internet riches.

If your memory fails, here's a refresher: In the early stages of Internet mania, retail merchants like Yahoo! Inc. (Nasdaq: YHOO) and Amazon.com, Inc. (Nasdaq: AMZN) took to orbit. When they free-fell back to earth, backbone providers like Cisco Systems, Inc. (Nasdaq: CSCO) and JDS Uniphase Corporation (Nasdaq: JDSU) were launched. When they fizzed, energy companies (which were painted as  “Internet” plays, because—as the logic of the day went—they powered the whole system) where ignited. 

In short, investors stepped back from each successive layer of Internet exposure as the risks of each layer became obviously apparent. 

Circuitous as the logic appeared, it was grounded (somewhat) in rationality. Risk-adverse investors want to avoid risk when confronted with it. The risk usually manifests first in front-line companies. 

In today's market, investors are stepping back from the front-lines of housing.  Indeed, price movement suggests investors are more willing to invest in the sector through home improvement centers like Home Depot, Inc. (NYSE: HD) and Lowe's Companies, Inc. (NYSE: LOW) than through homebuilders like Lennar Corporation (NYSE: LEN) and Hovnanian Enterprises, Inc. (NYSE: HOV). 

Investors with even less risk tolerance, but still desiring housing exposure, are stepping back further to the less-roiled environs of title insurance providers—the folks who ascertain the property's ownership and indebtedness status.

One company on these back lines that has maintained a semblance of balance is Stewart Information Services Corporation (NYSE: STC), one of the nation's largest title insurance groups, with a national market share of 11.8%.  Over the past year, its share price has fluttered between $34 and $44 a share (currently fluttering around $36), which compares favorably to the homebuilders, many of whom have seen their share prices plummet by 50% to 70%.

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