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Super Star Pick of the Day - AIG
August 08, 2009
AIG - America International Inc
AIG is undoubtedly last week's super star. The stock gained more than 100% within one week. More to come.
What is behind its recent big up moves? Of course, It is not hard to guess: The company announced its first profitable quarter after seven consecutive huge quarterly loses.
We all know that insurance business is usually one of the most profitable and the profit has been very stable. In his early days, Warren Buffet main source of income was from his holdings on insurance companies.
But the financial meltdown which started from subprime mortgage crisis triggered by a dramatic rise in mortgage delinquencies and foreclosures in the United States destroyed or took a big hit on many insurance giants. The reason:
1. Many insurance companies invested huge amount of money into subprime mortgage backed securities and other related derivatives. As result, they incurred big losses.
2. Many insurance companies incurred additional loses if they provided financial guarantee insurance and related reinsurance services to such securities and derivatives.
AIG is one such company. They incurred huge loses and faced possible bankruptcy. Government considered the company too-big-to-fall and thus poured huge amount of money into the company and bailed it out. In the mean time, its stock price had a free fall, down 99.51% from a high of $1455 in 2007 to an all-time low of $7 in March 2009.
The stock took another hit after its 1-20 reverse split, which initiated by hedge-fund attack. But things were changing. We have noticed that the company may post its first profit for its latest quarter. Our research team collected all available data and took one week detailed study. Our conclusion: the company may make $1.33 - $1.87 per share profit.
Traded at $13.00+, the stock is grossly undervalued and should be one of our Hidden Gems. We pulled our trigger. We issued our BUY signal to our members on August 4, 2009 and bought it at $13.38. Our own fund also bought it.
The result: Just after our buy, the stock started its hugh up moves. It gained 64.42% on August 5, 2009 and stayed high as of this writing. The company reported $2.37 per share profit Friday, far exceeded our estimates. The stock closed at $27.14 Friday, a gain of over 100% within one week after our buy. If the profit is sustainable (analysts predicted an average of $10.32 profit for 2010), the stock should be in $50 - $100 range. Current price is still very low, less than 10% of last year's price ($450 - $500). Compared it with many 10-bager money losing stocks such as TRW, TEN, CAR, HTZ, ..., this stock has a much solid foundation to support its price. See its Chart:
Chances exist all the time. But only those who prepared for it can get it.
We have found out our next super stock pick now. Guess what it is? Only us can tell you.