Since November of 2012, American International Group (AIG) stock has risen by 18%. Stock analysts expect AIG to continue its ascent in 2013 as the U.S. government has virtually sold its entire stake in the insurance giant. AIG has been shedding assets including the sale of the Asian insurer AIA Group that made a big splash a few weeks ago. The sale brought in $6.45 billion to AIG which will come in handy in its efforts to refocus and develop its business after being freed of public ownership.
The Technicals
When looking at the moving averages (MA), AIG stock appears to be trending up. The 50-day MA is $33.50 while the 200-day MA is $33.20. The good news is that the current stock price of $36.30 is greater. Furthermore, the profit margin is an impressive 36.89% and the YOY (year over year) quarterly revenue growth has been remarkable too at 38.7%. AIG's PEG ratio (P/E to growth ratio) of 0.7 is very favorable, and it shows that AIG is at a 62% discount relative to the S&P 500.
The Fundamentals
AIG’s P/E ratio of 2.52 can be misleading to investors given the fact that the stock price has risen by 43.66% in 2012. AIG has remarkable growth potentials after selling off some of its subsidiaries like International Lease Finance Corporation. This allows it to concentrate on expanding the life and property and casualty divisions in an environment of economic recovery in the United States. At a 2.52 P/E ratio, AIG is considerably cheaper than its competitors such as Hartford’s (HIG), AON’s (AON) and Marsh & McLennan’s (MMC).
Additionally, the EPS of 14.41 indicates that AIG is trading at a considerable discount to its book value. Several big non-catastrophe events in 3Q12 and the $2B loss AIG had due to Hurricane Sandy have painted a less than pretty picture of this financial stock's progress over the last year.
Investment analysts view AIG as a well-discounted turnaround stock and you should too
Hedge funds see the high upside potential of this financial stock and are looking to add a higher stake in 2013. The earnings reports haven't exactly given AIG the thumbs up, but valuation of the stock has continued to look attractive.
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