Genworth Financial Inc., (GNW) shares have been volatile for the past several weeks. Just a couple of months ago, this stock was hitting new 52-week lows at about $4 per share, but a recent rebound took the stock back over $6, just several days ago. With a big post-election market decline, the stock is off the recent highs, so it is a good time to take a look at what has fueled the uptrend in this stock and also consider the recent insider buying.
This stock dropped sharply in July and August when a near perfect storm hit the company. This includes the fact that Genworth cancelled plans for an initial public offering for its Australian mortgage insurance unit, and the fact that the CEO resigned. The company has also been facing the prospects of a credit rating downgrade which could impact product sales and interest rates. In addition, concerns about the future profitability of the long-term care insurance industry have increased as low interest rates have cut investment results and profit margins for Genworth. However, the market and Genworth shares appear to be digesting those concerns and the outlook for this stock has been improving. The company recently reported solid financial results which confirms that investors were overly pessimistic about this stock.
For the third quarter of 2012, the company had operating income of 25 cents per share. This compares favorably with earnings of 13 cents per share for the same quarter last year. Results were driven higher by improvements in the mortgage insurance and wealth management unit.
Another recent positive comes from insider buying at Genworth. On November 4, Martin P. Klein (an officer) purchased 15,000 shares at $6 each for a transaction value of $90,000. That is a solid new buy especially since the stock is well off the recent lows. Insiders tend to know their companies better than analysts and outside investors, so this is encouraging, especially since it follows up on multiple insider buys (some of which were even larger) that occurred in May of this year.
With an improving outlook for the housing market and for Genworth, this stock looks cheap at just about 4.5 times 2013 earnings estimates. While some analysts have yet to turn positive on Genworth, the rebound in profits and the stock seems likely to continue. That is why it makes sense to consider buying this stock on dips.
Here are some key points for GNW:
Current share price: $5.56
The 52 week range is $4.06 to $9.68
Earnings estimates for 2012: 66 cents per share
Earnings estimates for 2013: $1.26 per share
Annual dividend: None
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I am long GNW.