To replace some of his financial-company holdings, Skornicka bought shares in Annaly Capital Management (NLY), a realestate investment trust that was trading around 14 late last week, near book value, and has a hefty 14% yield. Says the manager: "It wasa margin play back in 2007.The margins were flat. Now, they've widened, and government-agency securities are what's left in the game [portfolio]." He bought the stock at 15.

Skornicka also set out to find which firm would benefit most from the bust-up of AIG (AIG), the world's largest and, arguably, most aggressive, property-and-casualty insurer. His answer: ACE (ACE). The Swiss insurer appears to be slowly stepping into businesses like commercial and workers' compensation, which AIG has pulled back from. ACE is expected to earn around $7.75 a share for fiscal 2009. At a recent 35, it was trading around 4.6 times 2009 earnings, or around book value. "ACE clearly stands to benefit the most from the troubles affecting AIG," says Skornicka. "Rates have been softening in the property-and-casualty business for years. Now they're starting to stabilize."

Last autumn, the portfolio manager also bought shares of Aon (AOC), the world's largest insurance broker and consultant, as a play on pricing stability returning to the P&C business. Aon's revamped managementhas turned the company around via acquisitions over the last four years. As a result, AON has picked up market share from rivals, and enjoys widening margins. At its recent price of 38, AON was fetching roughly 11.6 times the consensus 2009 earnings estimate of $3.31 a share.

Recognizing a pattern of management denial, Skornicka dodged Bear Stearns, and dumped Freddie Mac (FRE), Lehman, Citigroup (C), Wachovia and Washington Mutual before their slides gathered force. Most recently, he dropped Bank of America (BAC) due to larger-than-expected losses. His one last banking giant: JPMorgan Chase (JPM).

Recognizing a pattern of management denial, Skornicka dodged Bear Stearns, and dumped Freddie Mac (FRE), Lehman, Citigroup (C), Wachovia and Washington Mutual before their slides gathered force. Most recently, he dropped Bank of America (BAC) due to larger-than-expected losses. His one last banking giant: JPMorgan Chase (JPM).

Recognizing a pattern of management denial, Skornicka dodged Bear Stearns, and dumped Freddie Mac (FRE), Lehman, Citigroup (C), Wachovia and Washington Mutual before their slides gathered force. Most recently, he dropped Bank of America (BAC) due to larger-than-expected losses. His one last banking giant: JPMorgan Chase (JPM).