donderdag 8 augustus 2019

Assured Guaranty ticker AGO a "cannibal" that is shooting fish in a barrel.

“When companies with outstanding businesses and comfortable financial positions find their shares selling far below intrinsic value in the marketplace, no alternative action can benefit shareholders as surely as repurchases.”
--Warren Buffett, 1984 Berkshire Hathaway Annual Report
“Pay attention to the cannibals.”
-- Charlie Munger

Assured Guaranty has $6 722m in equity (book value) and 99m shares outstanding.
$6 722m book divided by 99m shares = $68 book value per share.
The share price is $46 per share and the company is buying back $300m in shares. 
Equity will decrease by $300m to $6 422m due to money being spent on shares. At the price, $300m / $46 per share, they can buy back 6,5m shares. Bringing the share count down to 99m - 6,5m = 92,5m shares
New book value per share: $6 422m / 92,5m = $69,4 a 2% increase.
Earnings per share should increase by 7% assuming the decrease in book value doesn't hurt profits. 
Like shooting fish in a barrel with the water taken out. 

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