August 23, 2010 | In: Financial, Opinion

Is AIG Becoming A Buy?

I first looked at AIG back in May, the stock around $34 then. I asked a friend who recommended avoiding this stock.

But lately (with the exception of the last couple of weeks), the stock has been performing very well, as there were always good news issued by the company or about the company. AIG was once the world’s largest insurer, and required two bailouts that resulted in what was called the nationalization of AIG. The stock bottomed in March of 2009 to less than $10, after it was trading for $1450 2 years earlier. Wow…

A year and a half later, the Feds have decided to cut AIG’s credit line by $3.6 billion, claiming that the US insurer probably no longer needs taxpayers money. This is an extremely positive sign but should be looked at with scrutiny. The US government is still the largest holder of stocks in AIG, and wants to dump them at a decent price. These good news will increase investors’ confidence in the company and thus will have a positive effect on the stock price at the short term, which will allow the US government to start dumping its stocks. AIG is still heavily in debt, and is still losing money (current EPS is -43.15). I would buy (if I had the money) AIG tomorrow, but I would sell it when the stock goes up $2 or $3. This stock is still very risky, and AIG’s exposure to risky markets is always very high. Be warned…

AIG closed at $35.17 on Friday.

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