By Luci Morland
Has AIG (NYSE:AIG) gone from “too big to fail” to “too cheap to overlook”? Maybe.
Conventional wisdom says that the smart money is found in leading the herd from pasture to pasture. However, it is unlikely you, a lone investor, have the financial means to move the entire market overnight, the way Goldman Sachs might.
The next best way is to at least be part of the herd, moving from profit to profit, grazing some off the top as you make your way through time and space. That will keep your account funded and moving forward, assuming the herd doesn't pull a lemming and start jumping off cliffs.
But the real money, the Warren Buffett money, comes from doing your homework and then going against the herd. The billionaire investor is famous for his saying “Try to be fearful when others are greedy and greedy when others are fearful.”
Perhaps it is time to get greedy with AIG.
The company has been the whipping boy of pundits, politicians, and professional whiners for three years. It was the poster boy for bailed out companies, requiring nearly $200 billion in funding to stave off potential global collapse.
AIG thanked taxpayers by rewarding its executives with $165 million in bonuses in a year where the company damn near destroyed the entire financial world. While it was legally necessary, per the contracts in place at the time, it was the sort of political blunder that, in previous eras, might have triggered mass tarring and feathering.
Despite all of this, the government bailed out the insurance giant. This week, the Treasury department sold some of its stake in the company on the market. The event was almost a disaster, and the government barely broke even in its offerings.
Combined with investor concern that the company may never return to profit-generating days has the potential to drive the price of the stock down even further. It's already down huge on the year, including a 3% loss Wednesday.
At some point, investors might wake up and realize what “too big to fail” actually means. By the time they do, it might be too late to get in on the ground floor of what could be a big gainer in future years.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.