Either SWS is going bankrupt or it has become an incredible bargain due to tax loss selling. In any case considering that it's impossible for the ordinary investor not having inside information to make a totally informed investment, I think the risk/reward potential here makes a gamble here an interesting speculation. I hit a home run on Ford with a similar scenario. The potential downside risk was small given the low price and the opportunity for a big gain while in doubt attractive. WW
I'm strictly a value investor and have had very good success the last two years buying beaten up stocks where the company balance sheet and earnings were still intact.
I got into this one a month or two ago. I thought the downside was limited as they had taken a couple of write-offs and I thought they would show improvement in the recently released earnings report. After reading the Q, I was not as confident. They took a large write-off again and were not optimistic that the write-offs are over with.
I have not sold because I believe once the housing crising hits bottom (which I believe will come sooner than later) SWS will make a large move up.
I actually was encouraged by the downgrade as this is usually a leading indicator that the bottom is near. I'm still long.