It Might Be Time To Cash In On The Double In Genworth Shares

Genworth Financial Inc., (GNW) shares have surged in the past few months and the stock is even starting to look like a momentum play. Not long ago, investors soured on this stock and it hit a 52-week low of $4.06 on August 2. There were a number of reasons to be concerned since the company had released news earlier in the year that appeared worrisome. Genworth had cancelled a plan to spin off its Australian mortgage insurance unit, and it also announced the resignation of its CEO. If that weren't enough, a credit ratings agency said it might cut the ratings for Genworth and that could raise borrowing costs. With so many negatives, it was reasonable for the stock to drop, but going down to about $4 was clearly an overreaction. However, investor sentiment has seen a tremendous shift and the stock has doubled and now trades for about $8.30 per share. While the stock has a long-term upside, it's hard to get excited about the valuation and it makes little sense to "chase" the stock after the major recent rally.

The biggest reason for the big jump in the share price seems to be coming from signs that the housing market has hit bottom. Recent economic data has also shown that the worst might be over for the jobs market as well. This has fueled a major rally in homebuilding stocks, which now also appear extended and that rally has spilled over into the mortgage insurance sector, which has taken Genworth and companies like Radian (RDN) to new recent highs.

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