Steve Eisman, a portfolio manager at FrontPoint, got aggressive on a quarterly conference call with Genworth this morning.
You can read the full transcript by clicking here.
We’ll have the audio for you in a moment, but here’s what he said.
I think it’s pretty clear, this was a very poor quarter, but there are larger issues here that I think you need to address.
Frankly the only accomplishment that this management’s team contributed to is the survival of this company, which I don’t mean to minimize, but otherwise this management team has overseen a massive destruction of shareholder value.
In fact at the current price to book, Genworth is selling at a steep discount to both MGIC and PMI, the pure-play MIs. This is probably because this company does not meet its cost of capital and any of its businesses.
In other words the market currently is describing negative value to your non-MI businesses – A pretty astonishing statement and I don’t get any sense of urgency from this management’s team as to how this is all going to be addressed.
To keep going down the current road seems to me a complete waste of time. Clearly the best use of capital for this company is to buyback stock when it is at discount, less than 40% of book value. The ROE on that activity is multiple higher than any new business you can write.
So it seems to me, we can go down a couple of roads, number one, you could shutdown businesses and use resulting excess capital to buyback stock or you can give us a roadmap and the time schedule which we’re going to hold you too as to when each of your businesses will achieve at least its cost of capital.
I want you to understand that my patience, but the patience of your shareholder is not infinite and my patience is just about done.
And I would like a response to my comments and one other thing, at the beginning of this conference call Mr. Fraizer said that they might do bolt-on acquisitions; do not do that. Your stock is selling at less than 40% of book value, you do a bolt-on acquisitions and I will wage a proxy battle immediately to throw you out of here.
Now, I will like some response.
(According to the Wall Street Journal, FrontPoint owned about 2.2 million shares of Genworth as of June 30, or about 0.5% of the outstanding shares.)