AIG is a world leader in insurance and financial services, and is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG was the 29th-largest public company in the world. It was listed on the Dow Jones Industrial Average from April 8, 2004 to September 22, 2008. AIG had its own Lehman moment on steroids, which required a $190 Billion Federal Reserve Bank and U.S. Treasury bailout. It subsequently paid off its loan in December 2012 resulting in a $23 Billion profit for the U.S. Treasury and the U.S. Treasury no longer owns AIG common stock. This eliminated a huge overhang the markets had to absorb whenever new AIG shares were issued to pay off government debt.
Insider Monkey tracks 450 hedge funds. They recently reported that with 142 hedge funds holding long positions in the latest round of 13F filings from the SEC, American International Group takes this crown, and the 2nd half of 2012 was a comeback story. Hedge fund interest in the insurer rose by 80% in Q3 and after 21 of the funds Insider Monkey tracks bought shares in Q4, 142 are now bullish on AIG.
Among its fans…
Appaloosa Management is a value hedge fund managed by billionaire David Tepper. The fund has an estimated $16 billion under management. AIG became Appaloosa's largest new position in the third quarter, with the fund reporting a position of 8.3 million shares. Tepper initiated a position in the stock between July and September of 2012. According to its latest 13F for the period ending 12/31/12, Appaloosa still owns 6.1 million shares.
AIG was the second biggest position of Dan Loeb's Third Point in the 3rd and 4th quarters of 2012. He still owned 18.5 million shares as of 12/31/12, down from 23.5 million shares in 9/30/12. In reference to recent selling by Tepper and Loeb, keep in mind AIG stock was up 52% last year.
Bruce Berkowitz isn't a hedge fund guy, but operates the value oriented Fairholme Fund. According to its latest report, the fund now has 42% of assets in AIG common stock and warrants. Berkowitz has an excellent long term track record but his fund took an unusual 32% hit in 2011 since he was early in taking a large position in AIG and the financials. Berkowitz knows when to 'stay the course' like he did in the 90s with his financial sector investments that subsequently skyrocketed.
Is it time to sell AIG now that so many hedgies own its shares like the latest crowded position that got hit hard, Apple Computer? I personally believe we are in maybe the 2nd inning of the AIG stock ascent. Josh Stirling, an analyst at Bernstein is also an AIG stock fan. "With the Treasury out, and AIG a public company once again, this will be the year that the company begins to make progress on driving earnings, returns to buying back stock, and likely institutes a dividend," he noted last month.
The insurer still trades at about half of its book value while rivals ACE Ltd. (NYSE:ACE) and Travelers Cos. (NYSE:TRV) change hands today at more than the measure of assets minus liabilities. "We see a once in a generation low-risk chance to buy a recovering franchise at a substantial discount," wrote Stirling, who recently reiterated his outperform rating on the company. "Investors will rotate from bidding for the now expensive quality names to scouring for value among the turnaround stories."
I'll consider AIG more if a sell candidate as it gets closer to its now growing book value.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I own AIG stock indirectly through my holding in The Fairholme Fund.