Penny Stock Watch - ABK

The subprime crisis turned a lot of financial blue chips into junks and even into penny stocks. One of them is Ambac Financial Group, Inc. (ABK), a leader in credit insurance. A year ago last July, ABK was still a $100 stock. Yet the financial crisis and panic investor send the stock to as low as $1.04 per share reaching a multi-year low.

However in the past few days the stock came back alive with a 50% gain on Tuesday on bargain hunting. So is this a penny stock worth buying?

Technical
There is nothing positive about the technical chart except KD which is now rising. All other indicators still point to a bear market.

Insider
The insiders are actually very bullish about the company and were buying the stocks aggressively last month. The institutions are also heavy buying the stocks.

Financial
The income statement looks miserable as the company went from net income of $213 million in March of 2007 to net loss of $1.66 billion in March of 2008. The company's cash is a little better in March but is still dangerously low. The cash flow statement isn't good either as the company is still losing cash in March.

Conclusion
The insiders are the only positive indicator. It may be good to wait a little while.

Penny Stock Score (1~5) 5 is highest
1. Industry (financial): 1
2. Technical: 2
3. Insider: 5
4. Financial: 1
Recommendation: Hold