Genworth Financial Popped: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Genworth Financial (NYS: GNW) popped 10% Friday in response to its CEO's suggestion that he would be open to cracking open the company and releasing a bit of the value stored inside.
So what: Genworth today is an amalgamation of multiple businesses. It's a life insurer, wealth manager, mortgage insurer -- it does everything but wash windows. Recognizing that the company's various aspects "may appeal to different groups of investors," CEO Michael Fraizer admitted Friday that although there's no plan to split up the company "in the near term," he's at least open to the idea.
Now what: I can see why. With its shares down 50% over the past 52 weeks, it's obvious that investors aren't giving Genworth the respect Fraizer thinks it deserves. For the most part, this seems due to the company's money-losing mortgage-insurance business -- unprofitable for three years now and counting.
Spinning off that division might not do much to improve its profitability, but it would at least relieve the dead weight on the rest of Genworth. It would also give gambling-minded investors a pure-play way to bet on a turnaround of the bad mortgage-insurance biz. I think it's worth a shot -- and it seems investors agree.
Will Genworth follow through on the spinoff suggestion?Add the stock to your Fool Watchlistand find out.
At the time this article was published Fool contributorRich Smithdoes not own (or short) shares of Genworth Financial. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.