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Markets: "trick" or "treat" ?

Last week was a pivotal week for markets and left investors wondering - was it a scary "trick" or opportunity "treat" ?

As expected and predicted GDP grew by 3.5%. At surface investors celebrated the news on Thursday with nearly 200% point gain. But on Friday, they had second thoughts after parsing the numbers and realizing that actual GDP growth excluding "cash for clunkers sales" and "inventory buildup", was below 1%. Now that these are one time events over, investors are looking forward and wondering from where growth would come ? Hence the Friday sell-off. Despite last 2 week sell-off, markets are still up by more than 50%. So there is still some time to cash-out gains and wait for opportunity in another sell-off which may take markets below 9500. However I am still sticking with my prediction of DOW near or above 10000 by year end.

Let's look at stock recommendation for the week:

Company: Genworth Financial
Symbol: GNW
Buy price: $10 to $10.50
Target price in 12 months: $ 15
Company background:
Genworth Financial, Inc. (Genworth) is a financial security company dedicated to providing insurance, investment and financial solutions to approximately 15 million customers, with a presence in approximately 25 countries.

Reasons for selection:
  • Annual revenues: $10 B
  • Market Cap: < $5 B
  • Book Value: $25. Trading at 40% of BV. Normally insurance companies trade 1 times book value
  • Recently raised $600 M at $11.70 per share. It is trading below that
  • Worst is behind it as seen from Q3 results where it beat estimates handily
  • This stock could rise similar to LNC and HIG. I won't be surprised if it goes closer to $20 in 2010
Hope all of you had good "trick or treat".

Have a great week ahead !

/Shyam

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