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Genworth: Why A 2016 Spin-Off Could Cause This $5 Stock To Double

Genworth shares are very undervalued due to concerns about its long-term care division, but the company appears poised to sell or spin off that division in 2016.

Genworth recently announced a deal to sell blocks of life insurance which I believe raises the cash it needs to move ahead with a spin off.

A banker at Goldman Sachs recently stated that buyers are emerging for long-term care insurance blocks as well.

Genworth could either sell long-term care policy blocks or the entire division, or spin off that division as a separate company in 2016.

Industry valuations suggest Genworth shares could be worth more than double, without the long-term care concerns and some analysts see upside to $16.

I recently wrote an article about Genworth (NYSE:GNW) which detailed why I was buying the stock, especially after the recent dip on news that the CFO departed. In the article, I pointed out that this same CFO had bought 15,000 shares just a few weeks ago (along with multiple other insiders including the CEO) and that I felt this insider buying was a good sign. When Genworth first announced the CFO departure we did not know what firm he joined next, which caused some investors and shorts to hit the sell button. As it turns out, the CFO (Martin Klein), took a position at Athene Holding Ltd. which had to delay its IPO plans earlier this year because it did not have a CFO in place. In such a situation, I believe that Mr. Klein was probably offered major compensation and other incentives if he agreed to leave Genworth and come to Athene Holding Ltd., so that it could proceed with an IPO. Some of these details are mentioned in a recent Bloomberg article. As such, it becomes increasingly likely that investors and shorts who sold Genworth shares on this CFO departure news were probably reading way too much into it and therefore overreacted. In that article, I also pointed out that Goldman Sachs (NYSE:GS) sees more buyers emerging for long-term care insurance assets. This could be great news and perfect timing...


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