Why American International Group Inc Slipped This Morning

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of American International Group Inc (NYSE: AIG  ) slipped about 2% in premarket trading after Deutsche Bank downgraded the insurance gorilla from buy to hold.

So what: Along with the downgrade, analyst Joshua Shanker lowered his price target to $55 (from $58), representing about 9% worth of upside to yesterday's close. So while momentum traders might be attracted to the stock's strength during the past year, Shanker's call suggests growing sentiment on Wall Street that AIG's valuation is a bit stretched.

Now what: According to Deutsche, AIG's risk/reward trade-off is pretty balanced at this point. "Management indicates that Fuji unit integration costs will keep expenses high through 2014, which suggests that core ROE may stagnate at around 6% for the foreseeable future," said Shanker. "While we believe cash flow will ultimately exceed core and GAAP EPS, we believe incremental buyers will need to see additional combined ratio improvement to be motivated to purchase AIG stock." Of course, with AIG still trading at a reasonable P/E of eight and price-to-book of 0.7, long-term investors might want to take Deutche's downgrade with a grain of salt. 

More dynamic dividend opportunities
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks, as a group, handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks, in particular, are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2873405, ~/Articles/ArticleHandler.aspx, 10/1/2014 1:01:14 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement