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Saturday, December 01, 2007

I wonder

I was just reading this:

Citi Investment Research analyst Heather Hunt said bond insurers' stocks seem to assume their ratings will be cut, which she does not consider likely. She expects the agencies to affirm MBIA's, Ambac's and Assured Guaranty Ltd.'s financial strength ratings.

She lowered her price targets and earnings estimates for the sector, but said the stocks' freefall has gone too far. While the industry faces steeper losses as more bonds go into default, the companies have enough cash to withstand the claims, she said.

Meanwhile, she said stocks in the sector are very cheap.

A bond insurer's stock has historically been worth an average of 1.6 times the value of its assets, according to Banc of America Securities analyst Tamara K. Kravec. Lately though, the stock of every major bond insurer stock is worth less than the value of its assets, some substantially less. Ambac's stock trades at 40 percent of its book value, a quarter of the historical average. MBIA's stock trades at 0.58 times the value of the company's assets.

"Times of turmoil create the best buying opportunities, particularly when fear is at its greatest," Kravec said.

She rates the sector "Overweight," and said the market appears to be pricing in "a very extreme scenario that assumes significant losses." The probability of those losses is relatively low, she said.


I wonder. Seems to me a lot of these so-called "experts" have substantially under-estimated the risk time and time again. Still, I'm not selling my MBIA. It's probably too late.

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