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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (42504)	5/3/2011 12:22:15 AM
From: Spekulatius	Read Replies (2) of 78722

re AIG - the float is 135M shares and Fairholm bought 44M+ of that ( the remaining ~1.6B shares are with the government). Looks to me like Fairholm was solely responsible for the runup to 60$/share but what is his exit strategy? Sooner or later the government is going to sell it's shares, so there is quite some sales overhang. Unless AIG is ridiculously cheap, why would I want to buy now? AIG book value/share is about 47$ tangible , so it trades at 66% of book, which sounds OK unless you realize that you can buy insurance companies without AIG issues for ~75% tangible book. Considering the huge operating losses that AIG still incurs, that does not seem like a large enough discount to me, even if I don't consider the overhang from a government stock sale. I do think there is value in AIG and Ben Mosche does a good job preserving it. For me though, with those issues, i would like to see a larger discount to tangible book before jumping in - close to 50% seems OK as an entry point - that would be around 25$/share.

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