April 30, 2011 | In: Financial
Is AIG Undervalued?
I check AIG, probably one of the scariest stocks ever, from time to time, so that I know if I had bought AIG when the stock was trading at $0.5 back in 2009 (well the stock had 1:20 reverse split since, so it was effectively trading at $10). Yes, that’s the greed (and remorse) in me playing his dirty little game. Sometimes I can’t help it, I’m still a human.
AIG has closed Friday’s trading session at $31.15, which was the lowest close in a year. It a yearly low of $31.11. The stock is now trading at half the price it was trading back in January 2011 (that’s 3 months ago). Of course, one could argue that the January effect had a huge impact on AIG, but I think there was also a lot of bullish speculation back then. Unfortunately, there is a lot of bearish speculation right now. Take a look at the stock’s technicals. The stock is very bearish on the short run and the medium run. The stock is neutral at the long run.
Now take a look at the stock’s trend, since the beginning of the year:
You can easily see the artificial bubble between December and January (typical pump and dump).
Technically, there is no argument that there are huge signals to avoid buying the stock. But what about the fundamentals of the stock. The stock is currently trading at a P/E of 2.21. Which means, that it’ll take the company roughly 27 months to buy back all the shares at the current stock price. Doesn’t this make the stock an attractive buy? What if AIG really decide to do that? Additionally, all the data is signaling that AIG is recovering, and in a big way. Quarter 4 of 2010 was 3 times better than the whole year of 2010.
I think stock investors are very harsh on AIG at the moment, and why shouldn’t they, this stock has wreaked havoc on the stock market, and is currently trading at 2% of its 2007 peak. But looking at the fundamentals of the stock, I think it’s a buy for a long term, but I wouldn’t enter until the stock finds a decent support level, and breaks the bearish trend.