• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Positive Catalysts for Two Financial Stocks

Improved fundamentals, new business models are the keys.
By BRET JENSEN
Oct 15, 2013 | 12:30 PM EDT
Stocks quotes in this article: GNW, GPT

"Investing right now is like taking a shower knowing Norman Bates is in your house"  -- Political columnist Jim McTague

In Monday's column,  we discussed how difficult it is for investors to put new money to work in a market which is being primarily driven by the daily happenings in Washington. I highlighted a couple of smaller capitalization concerns that should continue to grow at a rapid clip regardless of what the two political parties do.

Another way to beat the market is to find companies which are benefitting from positive catalysts that have not been fully recognized by the market yet. I want to look today at a couple of financial stocks that are either benefitting from improving business fundamentals, or are changing positively their business model.

Genworth Financial (GNW) is one of the largest insurance and financial services holding companies in the United States and has an expanding international presence. It is also one of the leading private providers of mortgage insurance, which almost bankrupted the company during the financial crisis. The company has been on the mend since that near death experience.

Ironically, this mortgage insurance business is now one of the main drivers of Genworth's improving earnings picture. The FHA has raised mortgage insurance fees which have allowed Genworth to gain market share. The company is also benefitting from the exit from bad mortgages and the increase of money in good mortgages, which is happening at impressive rate.

Genworth should also be buoyed by the continuing housing recovery as well as rising interest rates which help insurers' investment returns. Earnings are tracking to a 25% Y/Y gain and analysts expect the same type of increase in FY2014. The stock sells for less than half of its book value and right around 9x forward earnings.

Gramercy Property Trust (GPT) is a small ($275 million market capitalization) real estate trust. Over the last year the company has exited the risky CDO business, hired an institutional quality management team and is transforming the company into an office industrial focused triple net REIT with an asset management arm.

The company has acquired some $380 million in properties with a 9% capitalization rate over the last year and has no meaningful debt maturities for many years. Compass Point recently initiated the shares as a "Buy" and sees more than 40% upside from the current stock price. The analyst firm believes the company will initiate a dividend next year and by 2015 will have a 40 cents-a-share-annual payout, which would be an over 8% yield at the current stock price.

Insiders have been net buyers of the shares over the past few months. This evolving REIT is relatively uncovered on the street and the shares change hands at $4.60 a share. The only other analyst price target on the company is $6 a share.

A good portion of the company's assets are industrial properties like cold storage facilities or truck terminals located in fast growing target markets. These types of mundane logistical assets should throw off consistently rising cash flow, which can be harnessed to reward patient income investors.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jensen was long GPT.

TAGS: Investing | U.S. Equity | Stocks

More from Stocks

A Rally Driven by Fear (of Missing Out)

James "Rev Shark" DePorre
May 27, 2022 4:28 PM EDT

What's next after this seesaw week? One thing is for sure: More volatility.

Let's Take Nikola for a Spin. And Then Return It

Mark Sebastian
May 27, 2022 2:56 PM EDT

I wouldn't want to own NKLA, but I could see riding it for a few days.

3 High-Yield Retail Stocks With Attractive Valuations

Bob Ciura
May 27, 2022 1:30 PM EDT

Here's the bull case for three retail stocks that offer low valuations and high dividend yields.

Here's How to Wrangle JPMorgan, the '800-Pound Gorilla' of Banking

Brad Ginesin
May 27, 2022 1:27 PM EDT

The financial services giant just held its first investor day in three years -- let's open the vault and see what's inside.

As Zscaler Rallies, Charts Say the Stock Could Hit This Level Soon

Bruce Kamich
May 27, 2022 1:23 PM EDT

Here's how aggressive traders can play the cybersecurity name.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 10:58 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "The Tremendous Power of the Sell Button"
  • 02:46 PM EDT STEPHEN GUILFOYLE

    We're Shedding Some of This Holding on Strength

    Check out the Stocks Under $10 portfolio here!
  • 11:33 AM EDT PETER TCHIR

    Thoughts Ahead of the Fed Minutes

    Recent economic and earnings issues are convincing...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login