AGO - Assured Guaranty

[Guest zgrendi]

Not much on sale out there, but this seems like an interesting stock worthy of a deeper look.  Municipal bond insurer.  Nice margin of safety by my back of the envelope DCF analysis.  Shares are being punished because of feared exposure to Puerto Rico debt crisis.  But the company has been profitable for past 15 years, even through the financial crisis.  Priced at 60% of book value.  Market seems to assume PR will never ever pay any debts back on products insured by AGO, PI is only covered and payable if/when it comes due.  Rising rates obviously good for the bottom line.  Got the idea from TIP (the Investor's Podcast), which is a fun show worth a listen.

 

Anyone else see this company on their screen and have any thoughts?

[zippy1]

https://www.cnbc.com/2018/04/23/hedge-fund-manager-david-einhorn-is-betting-against-assured-guaranty.html

Hedge fund manager David Einhorn is bearish on bond insurer Assured Guaranty.

 

Assured Guaranty's "pretax income looks likely to collapse," he said at The Sohn Investment Conference in New York Monday. "The shrinking profits should pressure [share] buyback capacity … It's a melting ice cube that is paying out the drops while it can."

 

The investor said Assured Guaranty has about $7 billion in capital and is 32-times to 54-times levered, depending on how its exposure is measured. He noted that the company has significant exposure to Puerto Rico debt.

 

"Puerto Rico is the wild card in the AGO story," he said. "The population is no longer growing."

 

He estimates Assured Guaranty has roughly $2.8 billion of "implied loss" due to its Puerto Rico exposure, according to one of his analyses.

 

"If AGO recognized its much bigger loss [in Puerto Rico] its S&P rating would be at risk," he said. "Puerto Rico may be just the tip of the iceberg."

 

Assured Guaranty's shares fell more than 3 percent in the after hours trading session Monday. The company did not immediately respond to a request for comment.

Hmmmm :-\