Yesterday, Assured Guaranty reported very strong 1st quarter earnings and once again saw an increase in both operating and adjusted book value. Over the last year, the company has grown both metrics by roughly 15%, despite adding material reserves for its Puerto Rico exposures and paying a respectable 2% dividend. The stock still trades at less than 50% of adjusted book value, highlighting the immense upside of the opportunity over the next few years. While the eventual outcome of Puerto Rico is uncertain, it is not risky, as the company is well-reserved and can handle any impact from a financial perspective. We are only talking about $3-$4 per share of an impact even in the worst case scenario and there is just as good of a chance that company will prove to be overly-reserved as things play out. The recent acquisition of CIFG and stock buybacks at a large discount to book value will more than make up for any additional losses in my estimation. Once we get more certainty in regards to Puerto Rico, I expect market participants will focus on the fact that the rest of the insured portfolio is very clean with little to be worried about. The company is performing incredibly well and will benefit when rates eventually do go higher. This is one of the few opportunities where we have a very real chance at 50-100% returns over the next 3 years with very little risk of permanent losses of capital, in a market where frankly I believe is quite expensive in most areas. Our patience should be richly rewarded. I hope that you enjoy the article: