The 'ick factor', and Ambac as an interesting long

I have found that a fruitful place to look for good investment ideas is amongst stocks that suffer from what might best be described as the 'ick factor' - i.e. it feels too icky to touch. And I have found that the more immediate and visceral the revulsion to the very idea of looking at a particular stock/industry/country, the better. The ideal reaction you want when you float an idea to most people is immediate disgust/dismissal. If you get that you're quite often on to something.

This is so for many reasons. For a start, it goes without saying that growth & fashion-chasing investors are unlikely to be interested in picking over dead carcasses, but the ick factor also means that a lot of otherwise intelligent and contrarian value investors, who generally act as the buyers of last resort in out of favor industries/stocks/countries, are also unlikely to even bother looking at it. This can result in larger-than-average degrees of undervaluation.