Are these the 3 riskiest shares to own?

Should you avoid Genworth Mortgage Insurance Australia (ASX:GMA), AP Eagers Ltd (ASX:APE), and Westpac Banking Corp (ASX:WBC)?

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What do a mortgage insurer, a car yard, and a bank have in common?

They're all heavily exposed to the wealth and spending habits of ordinary Australians.

Genworth Mortgage Insurance Australia (ASX: GMA) writes lenders mortgage insurance (LMI) which insures higher loan to valuation (LVR) ratio mortgages. It's under pressure from both sides; not only has it insured lots of loans to heavily indebted borrowers, but the big banks are increasingly bringing their LMI business in-house. Genworth thus faces the prospect of declining earnings as well as possibly expensive risks if the housing market deteriorates further. I would avoid Genworth today.

AP Eagers Ltd (ASX: APE) is an automotive dealership that sells both new and used cars. Just under half of its sales are in Queensland and the company recently downgraded earnings before re-upgrading them again as new car sales picked up. Although the company remains sensitive to further downturns in automotive sales, AP's financial position appears solid and the company has paid a dividend every year for 60 years. I think that AP Eagers is a buy at the right price.

Westpac Banking Corp (ASX: WBC) is the eponymous bank that will need no introduction. Among its peers, Westpac appears to be the bank that got into property lending the heaviest, and until recently approximately 50% of all its mortgages were interest-only. The business now must convert many of its interest-only loans into principle + interest (P+I) to satisfy regulatory requirements. While Westpac maintains that it has very high serviceability standards on its loans, I would prefer to wait and see how the borrower migration to P+I proceeds before making an investment here.

Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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