Ticker Shock: Why AIG Will Fall Back to Earth
Tuesday's top stories and stocks with potential to move.
Asian stocks rose overnight, but not by much. The Hang Seng and the Nikkei were up 0.75% and 0.36%, respectively. However, European stocks were in negative territory earlier this morning. And here in the US, we're currently trading higher.
Here's what I'm seeing this morning:
American International Group (AIG):
As fellow Minyan Justin Sharon points out in Upgrades & Downgrades: AIG Gets Knocked Down, Bernstein cut its rating on these guys from Market Perform to Under Perform.
1. Just look at the recent run the shares have had. It's amazing -- and great for folks that were able to cash in. But unfortunately, because I believe in gravity and feel this stock has gotten very far ahead of itself, I wouldn't touch it with a 10-foot pole.
2. Let's just say I'm wrong, and Bernstein is wrong, and the stock continues to grow like a vine at a breakneck clip. In terms of a catalyst, what's going to justify the price? Yeah, I know -- 2010 could be a big year for earnings. But that's a long way away; lots of things can happen between now and then.
For my previous take on AIG, see Ticker Shock: Three Reasons Not to Trust AIG's Comeback.
I'm sorry Airgas longs, but in this writer's humble opinion, the Pennsylvania-based industrial-gas company isn't the sexiest story out there.
The scoop is that it's replacing Cooper Industries (CBE) on the S&P 500, which could ultimately draw a lot of attention and interest in its direction.
There are some other things here that retail and institutional investors might find interesting:
1. It's beaten earnings estimates four quarters straight.
2. It's expected to grow its bottom line at a more than 15% clip from this year to next. The current year estimate is $2.77, and next year its $3.19.
3. Can you say, "dividend?"
I'm certainly not saying the stock goes to the moon. But there's enough to chew on here that makes me believe it captures a fair amount of attention in the months ahead.
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