Genworth Financial Maintained At Overweight: How To Play It! (NYSE: GNW)

Genworth Financial, Inc. (NYSE: GNW) is being maintained at a Overweight rating by analyst Eric N. Berg, who is a CFA at Barclays Capital. With a $16.00 price target on the shares, Mr. Berg believes there is not much more upside to the shares based on current conditions. As a result, we think this could turn into a great trading idea.

"We continue to believe that Genworth’s capital position, as measured by its risk-to-capital ratio, will likely remain materially better than that of competitors – a result, again, of Genworth’s superior credit profile and a factor that should permit Genworth to grow its mortgage insurer faster than peers," explains Eric N. Berg, CFA.

Trade Idea: Covered Calls For 52% Annualized Return
Based on the analyst's valuation of GNW at $16 per share, or only $0.06 higher than Thursday's close of $15.94, we think writing covered calls slightly out of the money would be a good idea.

We like the $17.50 strike calls that expire in June 2010. The closed at a price of $1.04 which is all extrinsic value that we get to keep no matter what. By selling options against the position, we would allow over $1.50 in price appreciation before we cap our profit, on top of keeping the $1.04 per share. So if the stock closes at $17.50 or higher, we make $2.54 per share, 15.94% over the 112 day period. This equates to roughly 52% on an annualized basis.