Based on the aggregated intelligence of 165,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, financial products company Assured Guaranty (NYSE: AGO ) has received a distressing two-star ranking.
With that in mind, let's take a closer look at Assured Guaranty's business and see what CAPS investors are saying about the stock right now.
Assured Guaranty facts
| Headquarters (Founded) |
Hamilton, Bermuda (2003) |
| Market Cap |
$3.26 billion |
| Industry |
Property and casualty insurance |
| Trailing-12-Month Revenue |
$1.95 billion |
| Management |
CEO Dominic Frederico (since 2009)
CFO Robert Mills (since 2004) |
| Return on Equity (Average, Past 3 Years) |
4.8% |
| Competitors |
MBIA (NYSE: MBI )
Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B )
|
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 35% of the 334 members who have rated Assured Guaranty believe the stock will underperform the S&P 500 going forward. These bears include Bman409 and All-Star mukwonago53149, who is ranked in the top 10% of our community.
Earlier this month, Bman409 offered a rather succinct reason to stay away from the stock: "Municipal debt exposure."
Thanks in large part to rival Ambac's recent bankruptcy and MBIA's financial woes, Assured Guaranty's profits have been surging of late on a big increase of business volume. However, our community remains worried that its whopping municipal bond exposure will eventually come back to bite it. Assured Guaranty insures more than $30 billion in municipal bonds yearly, while Warren Buffett has gone so far as to stop Berkshire Hathaway Assurance from backing new issues.
CAPS All-Star mukwonago53149 elaborates on the bear case:
They were nearly wiped out by defaulting sub-prime mortgages. Since then, their share price has risen. ... But soon, they'll be slammed by an even bigger wave of defaulting Muni Bonds. The perfect time to bet against them is NOW.
Like Warren [Buffett] says ...
"[When] a few communities stiff their creditors and get away with it, the chance that others will follow in their footsteps will grow. What mayor or city council is going to choose pain to local citizens in the form of major tax increases over pain to a far away bond insurer?"
What do you think about Assured Guaranty, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!
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