Should i buy ambac stock
With a price to book ratio of 0.
Ambac Financial Group Stock Value Analysis
Bond insurers have not done very well in AGO is down 2. The bond insurers have badly lagged the market because of concerns that Puerto Rico will default on its debt. If Puerto Rico defaults, the bond insurers will have to pay the interest and principal on the Puerto Rican bonds that they have insured.
Of the three bond insurers, Ambac is the least exposed to Puerto Rico. More importantly, unlike MBIA and Assured Guaranty, Ambac doesn't have any exposure to PREPA, Puerto Rico's troubled electric utility that many thought would default on its debt this month.
Why Ambac Financial Group Stock Is Getting Crushed Today -- The Motley Fool
Most of Ambac's insured debt is higher quality debt with a debt service coverage ratio of 1. Ambac's Puerto Rico exposure is manageable. The majority of Ambac's insured bonds don't mature until or later, while Ambac's earliest bond maturity is in Ambac has enough operating income to pay the interest on the insured Puerto Rican bonds without the need to dip into shareholder's equity.
Ambac has plenty of liability coverage. The only way for Ambac's Puerto Rico exposure to really hurt the company would be if Puerto Rico's problems somehow spread to other bonds that Ambac insurers. This is a very unlikely, however, as the U. Many hedge funds own Ambac.
Centerbridge Partners is the largest hedge fund holder with 2,, shares. Centerbridge's Ambac stake makes up 3. In second place is Canyon Capital Advisors with 2,, shares.
Canyon Capital's Ambac stake makes up 1. In third place is Chris Hohn's Children's Investment Fund which had 1,, shares at the end of March. Marathon Asset Management is another hedge fund that is bullish on Ambac.
Insiders have also been buying. According to SEC filings, director Scott Stein bought 2, shares on July 8. Another director, David Greene, bought 3, shares on July 8.
The director purchases follow CEO Tavakoli Nader's purchase of 15, shares between July 2 and July 7. Insider trading is important to analyze because studies show that insider trading can produce alpha.
While there are many reasons why an insider would sell, there is only one reason why an insider would buy. Academic research shows that certain insider purchases have outperformed the market by an average of 7 percentage points per year.
In addition to following insiders, another way to beat the market is by following the small-cap stock picks of hedge funds. Our research shows that the 15 most popular small-cap stocks among hedge funds have outperformed the market by nearly a percentage point per month between and The company has good hedge fund ownership, insider buying, and enough cash flows to handle its Puerto Rican exposure.
The company lacks a catalyst to send shares higher in the short run. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it other than from Seeking Alpha. I have no business relationship with any company whose stock is mentioned in this article. Is Ambac A Good Buy?
Summary Ambac has plenty of operating earnings to cover its Puerto Rican exposure. Insiders have been buying.
By Jay Smith Bond insurers have not done very well in Investing Ideas , Insider Ownership , Financial. Want to share your opinion on this article?
Disagree with this article? To report a factual error in this article, click here. Follow Insider Monkey and get email alerts.