Friday, October 26, 2007 0 comments ++[ CLICK TO COMMENT ]++

To Watch: Ambac (ABK)

I wasn't around back then but it seems like the current plague infecting financial stocks is similar to the savings & loan crisis. I have read books/articles where investors said that solid banks were being sold off along with the trash. I'm reading John Neff's book on investing and he was saying how Citigroup was literally being given away even though it was a solid company. I feel like the present situation is similar the way the market is treating companies like Merril Lynch (ML) and Countrywide Financial (CFC).

Anyway, literally anything related to mortgages, debt, subprime, and the like, are being sold off sharply. The latest sub-sector seems to be debt insurers. These are companies that insure debt--similar to insurance companies. One company that caught my eye is Ambac (ABK), which is a very large debt insurer.

(numbers from Yahoo Finance and may be misleading (need to double-check))

Market Cap (intraday)5: 4.47B
Trailing P/E (ttm, intraday): 5.82
Forward P/E (fye 31-Dec-08) 1: 5.37
Price/Sales (ttm): 2.52
Price/Book (mrq): 0.74

ROE: 13.75%
Debt/Equity: 0.3

This company looks interesting and I'll take a quick look to see if it's worth investing in. The problem with financial companies for me is that I don't understand them. They are very opaque and highly vulnerable to accounting manipulations. Nevertheless I'm drawn to them since they are being sold off and companies like this one are less sensitive to the economy.

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