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AIG gains 1.2% premarket after Barclays upgrades to Buy - more details as we get them. The stock...

AIG gains 1.2% premarket after Barclays upgrades to Buy - more details as we get them. The stock has pulled back about $1.50 over the last few days following a big move higher.
Comments (1)
  • stefaith2
    , contributor
    Comments (11) | Send Message
     
    This stock has been undervalued by the market for a long time. Even after the recent run up it is trading at about 65% - 70% of book value. Now admittedly some of the assets on the book may be over-valued, but nevertheless the discrepancy is too large.

     

    The market price after rising after a splendid quarterly report was knocked down by an illogical down-grade by Goldman Sacks. The downgrade made no sense as it was based ostensibly on the supposition that AIG, due to regulatory constraints, would not immediately be able to either buy back stock or issue a dividend. In the first place issuing a dividend has no effect on shareholder value, because the dividend must necessarily reduce book value. Secondly it seems highly likely that AIG will return capital to shareholders within a few more months, either by a stock repurchase or dividend. It is their clearly stated intention to do so.

     

    In fact downgrades and upgrades should be ignored by investors, and treated as noise that has no long term effect.

     

    AIG is probably worth something like $55 - $65, and is a strong buy at current prices, regardless of what self serving brokers say.
    13 May 2013, 02:13 PM Reply Like
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