Highfields Capital Management LP
- Increased stake in GNW to 5.2% from 3.8%.
- Has "maintained a dialogue" with GNW management about possible options for mortgage insurance assets.
On Wednesday, Moodys said it was reviewing GNW for a possible downgrade into junk territory.
At the beginning of May, CEO Michael Fraizer resigned. CFO Marin Klien was named interim CEO and the search for a permanent CEO is ongoing.
GNW is trading at just 0.16 times book value. Comparably, MGIC Investment Corp (NYSE:MTG) trades at 0.48 times book value and Radian Group Inc (NYSE:RDN) trades at 0.38 times book value. While all of these companies are trading at a significant discount to book value, GNW is trading at a greater discount than MTG or RDN.
Australia Unit IPO Delayed
In mid April, GNW announced that it was delaying the IPO of its Australian unit because of weakness in the business. A sale of part of the Australian unit could help the capital structure of GNW.
Since May, insiders have purchased over $500,000 in stock. This is a strong vote of confidence in the troubled company.
Given the current valuation based on book value, the newfound activism from Highland, and recent insider buying I believe GNW is a speculation worth making.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.