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Ticker Shock: Why AIG Will Fall Back to Earth


Tuesday's top stories and stocks with potential to move.

I don't know what happened last night, but for the life of me, I couldn't fall asleep. I did everything but count sheep. Nothing worked. Finally I gave up -- I've been up since 3 a.m. Joy.

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.

My thoughts:

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.

Airgas (ARG):
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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No positions in stocks mentioned.

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