Penny Stock Pick - SCA

The roof has collapsed on global equity market as fears of US recession send global stock markets tumble and trigger the 0.75% emergency interest rate cut from the fed. The center of the turnmoil - the mortgage industry the stocks are basically in ruins. However as investors are running away from the mortgage related stocks, it could also be the best time to pick the dimonds in the rough. So can the Bermuda based Security Capital Assurance Ltd. (SCA) be the one? The bond insurers which saw its price plunging from $30 last July to as low as $1.5 two days ago attracted buyers today as the shares were lifted 30% in one day. Possible help from regulators ease fears of the total collapse of the industry. So will this be a good time to buy?

Technical
The technical chart shows weakness as the stock is trading below major moving averages. In addition MACD is below 0 showing the stock is in bear market. One possible positive indicator is KD where K line seems to be ready to rise above D line which could mean rebound.

Insider
The insider transactions seem positive as more than 90% of the transactions are buys. However since the current price is way below the insider purchase prices either the insider were not aware of the severness of the downturn or the stock is way undervalued. Hopefully the later is true.

Financial
The financial side looks weak as the company swung to third quarter loss of $89 million compared to profit of $28.4 million in the same quarter of previous year. The loss was due to a huge one time accounting charge of $131.7 million. The operating income without the charge was 72 cents per share which tops analysts estimate.

Penny Stock Score (1~5) 5 is highest
1. News: 5
2. Industry (bond insurance): 1
3. Technical: 2
4. Insider: 5
5. Financial: 2
Recommendation: Accumulate