Assured Guaranty buybacks drive book value growth
The guest argued that Assured Guaranty is a highly attractive investment due to its aggressive share buybacks executed at a steep discount to book value.
The argument
Despite being a mediocre business with headline risks (such as Puerto Rico and UK water utilities), the company retires 12% to 13% of its shares annually. The guest argued that buying back stock at 45% of adjusted book value and 66% of book value creates an extraordinary compounding effect that offsets underwriting mistakes.
The thesis, stress-tested
✓ What validates it
- ✓Continued quarterly share count reductions of 2% to 3%
- ✓Growth in adjusted book value per share in upcoming financial reports
▸ Risks discussed
- ▸Credit losses from legacy insured portfolios like UK water utilities
- ▸Low return on equity (ROE) inherent to the bond insurance business model
Hear it yourself
"So they're retiring 12 to 13% of their shares each year, and every single dollar of these stock buybacks over the last decade has been at a large discount to, you know, their their book values and and adjusted book values. Right now, the stock's trading at at something like 45% their their, adjusted book value, 66% of of their book value."
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