GuarantorsI can’t remember the last time I found something on the internet with as much value as reading two hedge fund managers argue it out over their respective positions in the financial guarantors Ambac (ABK) and MBIA (MBI). Here, Tom Brown (who is long) kicks things off with a rebuttal to a note Whitney Tilson (who is short) wrote about MBIA. Tilson responded, and Brown fired back with another reply.
My own favorite guarantor is Primus (PRS), which writes credit default swaps on mostly investment-grade corporate debt. I recently wrote a stock report and published my notes from a conversation I had with the company shortly thereafter, and would like to clarify one thing I said: Primus should not only consider buying back its own stock to effectively leverage up the company’s underutilized capacity; instead, the company should look to buy back its 7% preferred notes. The ticker for those is PRD, and with a par value of $25, the current $11 price offers a nearly 16% yield… not to mention the possibility of great capital gains. While I realize that voluntarily withdrawing a long-term funding source at times like this could be risky, it’s going to be hard to top a 16.2% annualized return.
AirlinesThe Philadelphia Inquirer had a story today about a report due out on the changing landscape of airline travel. While I’ve just started to read it myself, it’s a fascinating – albeit grim – look at what could transpire if airlines start going under. Read Beyond the Airlines’ $2 Can of Coke.
