Why One Money Manager Fell In Love With American International Group, Inc. (AIG), And So Should You

By the numbers
Berkowitz said in an interview with Bloomberg that he expects to see his top holding increase fourfold over the next five to seven years. That extreme confidence comes from his belief that a 20% implied annual return on investment is reasonable when you buy stock at less than half its book value. As the stock price rises, book value will continue to grow as well, according to Berkowitz — and so far, AIG has proven him right.

AIG lost 60% of its market value in 2011, but then turned around and gained 47% last year. Despite the stock’s price ups and downs, AIG’s book value grew 62% during the same time period.

Moving forward
As the air begins to clear around AIG, and the company continues on its path of improvement, Berkowitz is sure that his investments will pay off in spades. Both he and analysts believe that the company has room to grow while making efforts to improve profits and reduce expenses. Berkowitz says he’s just waiting for other people to agree with him, at which point the insurance giant will be seen once again as a valuable investment, driving both the stock price and book value up.

The article Why One Money Manager Fell In Love With AIG, And So Should You originally appeared on Fool.com and is written by Jessica Alling.

Fool contributor Jessica Alling has no position in any stocks mentioned. You may contact her here. The Motley Fool recommends American International Group (NYSE:AIG). The Motley Fool owns shares of American International Group, Bank of America, and Citigroup, and has the following options: Long Jan 2014 $25 Calls on American International Group.

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