Bruce Berkowitz's MBIA Investment Thesis: Case Study ~ market folly

Wednesday, September 12, 2012

Bruce Berkowitz's MBIA Investment Thesis: Case Study

Yesterday, we posted up Bruce Berkowitz and Fairholme Capital's investment thesis on Sears.  Today, we're presenting another case study from the money manager: their thesis on shares of MBIA (MBI).

In his fourth case study, Berkowitz looks at numerous catalysts for the insurance company:

Catalyst #1: National Public Finance Guarantee Corporation: A stand alone subsidiary of MBIA.  Judicial confirmation of MBIA's transformation could lead to an increase in credit ratings > lower expenses > capital raise > new municipal business.

Catalyst #2: De-risking: Continual reduction in structured finance exposures, declining claim payments on second-lien RMBS

Catalyst #3: Reimbursement for claims paid: Fairholme expects MBIA to recover at least half of the gross claims paid to date in a 2012 settlement or all in a 2013 trial.

Berkowitz then argues that market price of the stock is not equal to intrinsic value, highlighting the company's contingency reserves, owner's equity, run-off earnings, and positive trends.

Embedded below is Berkowitz's investment thesis on MBIA via his case study:

If you missed his other case studies, also check out:

- Berkowitz's thesis on Sears (SHLD)

- Fairholme's investment thesis on AIG

- Berkowitz's case on Bank of America (BAC)

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