One of the big stories last week was the group of hedge funds dropping or reducing their holdings in American International Group Inc (NYSE:AIG). And though there are some analysts who say the insurer is past its recovery point, and that shares accurately reflect the current operations’ value, there are some who believe there’s more to gain by sticking with American International Group Inc (NYSE:AIG). Let’s explore three reasons the insurer’s shares still have some momentum behind them, and how you can ride along with them.
No. 1: Growth
Not only has American International Group Inc (NYSE:AIG) been cutting back on legacy issues and cutting costs, the insurer has been growing its operations. With big investments in China and other emerging markets, along with reentry into mortgage guaranty operations, the insurer is well positioned to grow revenue over the coming quarters.
But the company doesn’t just have revenue growth to boast about, it’s share price also has room to grow. With the company trading at a 31.2% discount to book value, the upside for investors is clear as the stock price moves closer to the true value of the business. This has been one of the prevalent supporting reasons for investment theses from big names like Bruce Berkowitz. As a value investor, Berkowitz was drawn to the discount that American International Group Inc (NYSE:AIG) was trading at, with confidence that the share price would catch up in the near future.
No. 2: Dividend
Since the insurer shrugged off the remaining vestiges of governmental control, investors have been wondering when they would see a bit of returns in the form of a dividend. We got our answer in the first-quarter’s earnings call, when CEO Benmosche noted that the company had other priorities like liabilities management that came before any capital disbursements. But also in that call, there was a sense that the company had made a lot of progress on its priorities — and with a dividend next in line, that could mean investors may be rewarded by the end of the year.
Once the company begins to distribute to shareholders, expect to see more people flock to the stock, driving its price higher and giving you more reason to celebrate for being a long-term investor.