Ambac (ABK) is a stock that readers have known about for some time. I 've been posting about ABK for about a year and it ended up being a great short. After falling to as low as $1.04 in early July, ABK has been squeezing hard to settle around $7 on Friday. The lyrics of this song by The Primitives comes to mind:
"Here you go way to fast
don't slow down you're gonna crash
you should watch - watch your stay here
don't look out you're gonna break your neck"
don't slow down you're gonna crash
you should watch - watch your stay here
don't look out you're gonna break your neck"
Can anyone guess in what movie I heard this song last night?
6 comments:
Ackmann has been out of ABK for about 2 months (roughly). This is 1 of the many reasons ABK has run up. Still a large short position but lower than when it was hitting all time lows in the buck range. I think news of Connie Lee approval in Wisconsin (sp) adds 5 bucks to this easy.
I'm look for 15 by years end.
Troy
Hey Troy, thanks for the heads up on Ackman. I see it was confirmed that he was no longer short on May 15th in a 13-F and this rally began in early July. No coincidence there. As I mentioned in the chart, the volume pattern has been extremely bullish and other buy signals have been dead on. The thing is that ABK has rallied 600% in two months, thats way too fast imo. The 200 dma ~$10 will slow this rally down in the least. And it needs to slow down and base for a while or eventually ABK will roll over and crash again. I'm not familiar with the Connie Lee approval you spoke of but maybe you can fill me in. Congrats on the great trade so far and good luck.
I thought the other positions Ackman had taken were somewhat interesting:
As of May 15th:
Holdings (in $ millions)
Target (TGT)= $1,215.9
Target (TGT)= $133 (calls)
Sears Holdings (SHLD)= $794.3
Barnes and Nobel (BKS)= $200.4
Borders (BGP)= $62.1
MBIA (MBI)= -$74 (puts)
Greenlight Capital (GLRE)= $4.5
Wendy's (WEN)= $164.6
Cadbury Schwepps (CBY)= $1.6
http://www.valueplays.blogspot.com/2008/05/pershing-releases-13-f-more-sears-no.html
what is interesting is your thesis that this has run up too fast. I've heard this many times and sometimes agree. I rarely hear 'this dropped too fast'. Saying this would mean it had a reason to drop. And while ABK had a reason..it was way overblown. I think the recent 600% move up is really due to the realization that the sell was overdone. How do you know when the run up to take irrationalism out of a stock is overdone? Rhetorical question I guess. Anyway, Connie Lee is going to be a ABK capitalized subsidiary and will insure only U.S. public finance and global infrastructure and avoid the insurance contracts on complex financial products. Will be a brand new unit, writing new business, and will likely be triple AAA rated. Current ABK book value is near 30 dollars. It will get back to this value...my guess is within 18 months.
PS...think it consolidated @ 4 on 11 Aug, and around 5 in late aug. It will need to consolidate at this new higher level to begin next leg up. JMO
Best of luck.
Troy
Approval of Connie Lee announced today at 3:55
AH and Wed will be interesting for sure.
Troy
Hey Troy,
I saw the good news for ABK and it looks like the market is happy (+11% in the AH). However, ABK still remains well below that 200 dma at about $9.50.
If it gets there that will be an almost a 900% move in just two months! I realize that ABK was at these same prices only six months ago but this rally is going to be hard to sustain at this pace. Usually RSI and stochastics are good indicators for being over bought and they are both getting up there right now. Indicators aside, its just alot harder for a stock to rally 900% than drop 90%, especially in such a weak market environment. I have to admit though that technically, the intermediate term uptrend is still well in tact.
But I wish you luck and the market will prove one of us right on this, I have no position currently.
I always inspired by you, your views and attitude, again, appreciate for this nice post.
- Norman
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