Genworth Financial, Inc. (GNW)

I didn't get a 99+ CAPS rating by being sane, so don't expect me to suddenly reverse course here. As I have detailed in my article on taking advantage of bankruptcy risks (http://seekingalpha.com/article/115363-take-advantage-of-bankruptcy-risks-in-portfolio-management), one can often make substantial gains by diversifying holdings in companies with significant risks that have been overly discounted by the market on an individual basis. I've thought about it for a bit and have decided its worth the potential 100 point loss to take a risk on Genworth (GNW). This may be the dumbest CAPS move I ever make, but might as well take a chance.

Things aren't completely horrible for Genworth. Their balance sheet mostly consists of less risky securities that have been beaten down. There's a good chance those securities have bottomed (on their balance sheet). I'd value their fixed maturity portfolio somewhat higher than accounting rules require them to. Their real problem is they are overlevered and need to be more liquid, but not so much that I couldn't potentially forsee them riding this out. It's also notable that there have been some insider buys over the past few months - nothing huge, but still, sizable enough to be worth mentioning.

I give GNW 50% odds of survival. If they go bust, I lost 100% and if they survive, I could potentially collect a gain in the 400% - 1500% range. Risk-reward is in my favor, so even if this seems like the dumbest move I've ever made (and may very well be!), I'll take my chances.