Based on the aggregated intelligence of 160,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, bond insurer Ambac Financial (NYSE: ABK) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Ambac's business and see what CAPS investors are saying about the stock right now.

Ambac facts

Headquarters (Founded)

New York City (1971)

Market Cap

$507.5 million


Property and casualty insurance

Trailing-12-Month Revenue

$3.5 billion


CEO David Wallis (since October 2008)
CFO David Trick (since January 2010)

Return on Assets (Average, Past 3 Years)


1-Month Return



Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B)
Assured Guaranty (NYSE: AGO)

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 37% of the 1,143 members who have rated Ambac believe the stock will underperform the S&P 500 going forward. These bears include wolfhounds and All-Star TSIF, who is ranked in the top 1% of our community.

Just last week, wolfhounds explained why Ambac's recent results feel like a one-time anomaly:

Take away the $470m tax refund, [and Ambac] had an operating loss of $385m. Its asset base continues to deteriorate while it is barely covering interest on debt with cash on hand. It is still most likely to fail.

In a pitch from the same day, TSIF also pointed out holes in the bull case. Here's an excerpt :

Most of the rationale seems to be around two areas (myths).

1. Ambac had a profit this quarter. That isn't quite correct. Ambac had a gain this past quarter on the back of ONE TIME events. ...

2. Ambac peaked at $96 only three years ago. ... Ambac had a net tangible assets of POSITVE $6.1 BILLION. Today its a negative $3 BILLION and dropping. ... NET LOSS of $9 Billion in tangible assets. Why would a company that had a $9 BILLION drop in tangible assets and now has a NEGATIVE $9.8 Dollars per share, be worth $96 per share when it is writing NO new business and can't value what it has?

What do you think about Ambac, 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!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Berkshire Hathaway is a Motley Fool Inside Value and Stock Advisor pick. The Fool owns shares of Berkshire Hathaway. The Fool's disclosure policy always gets a perfect score.