Goldman analyst adds XL to list of recommended stocks

XL Capital's stock has plunged more than 50 percent in the last six months, partly due to the company's stake in Security Capital Assurance Ltd., a bond insurer bordering on collapse.

Goldman Sachs analyst Thomas V. Cholnoky wrote in a client note that even if SCA should cease to exist, XL's stock should be worth more than the $33.43 it closed at on Monday.

His price target of $40 already assumes a worst-case scenario: that SCA will have no value, and that XL will have to raise money to cover losses.

Cholnoky added XL to the investment bank's "Conviction Buy List."

Shares of XL Capital climbed $1.52, or 4.6 percent, to $34.95 in afternoon trading Tuesday.