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Strategies & Market Trends : Value Investing
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To: Wallace Rivers who wrote (10634)5/21/2000 10:48:00 PM
From: James Clarke  Read Replies (1) of 78952
 
Good article in Barrons on MBIA and the muni insurance business. I own Ambac, but it might as well be MBIA. Ambac stock was down 13% last year even though they grew earnings over 20% and continue to beat numbers every quarter. Insurance stocks are down for good reason in most cases - because earnings are down and pricing is lousy. That is most definitely not the case in this sector of the industry. Pricing was actually up last year.

Ambac is earning 15% on equity, with over 80% of its earnings etched in stone (if they wrote no new business this year, they would still have those annuity earnings), but it trades at about 11 times this year's earnings and 1.3 times book value.

The valuation of FSA in a takeover last year underscores the undervaluation of these stocks. The valuation of FSA, a smaller player in the industry, would imply a value of about $75 a share for Ambac I believe.
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