GNW Posts Earnings

GNW is one of my few stocks that falls neither in the dividend portfolio nor my MFI portfolio. I suppose someday it may re-enter the world of dividend stocks, but as they are a single step re,over from Junk, that may be a couple more years. That being said, they are an intriguing play on the mortgage market.  Fr those that do not know Genworth, they were a life insurance arm of General Electric that was spun off in 2005.  They have gotten hit by a double whammy.  First life insurers are generally struggling as they rely as much as any industry on bond investments.  They take in policy holder funds, and need to get certain returns (that they have locked in way in advance) on those funds to make money. Obviously, with all fixed income yields suppressed by our friendly fed, they are struggling. Second, they are one of the largest mortgage insurers in the world, with significant exposure to the Australian, Canadian and US markets. Obviously, especially in the US, insuring that people will pay their mortgages has been a loss leader.

However, in my opinion, the bad news is priced in and the investor that can look forward a couple of years may be richly rewarded. Their book value is about $34 per share, yet you can buy them for under $6. Obviously, the market believes the book value is overstated... Ad it may be correct.  But if house prices are finally starting to hi bottom and go up, that should alleviate the biggest overhang on the stock.  The second biggest is they need to improve their ratings with the rating agencies.  A spin-off (they are looking explicitly at spinning off Australian company), would really help.

Stay tuned...though they look to be up 4% Pre market based on last night's earnings.