"Hold" might make sense, if your time horizon is less than a year. That's the mindset of most retail analysts. For true longs, there aren't many stocks, selling at this discount, with a "fortress" balance sheet, huge cash flow, a path to improved profitability and global growth prospects. Who cares if we have to wait a few more quarters for the "traders" to get excited? Even $55 in twelve months is an acceptable return. I can live with that.
Benmosche needs to show that. He hasn't thus far. As I've said before, his turnaround efforts have been heroic but AIG is not showing a trajectory to greater profitability. TRV earns 15% ROE. AIG seems a very long way off from showing even 10%. AIG has been under performing its peers the last 6 months and for good reason. I think $60 is possible this year if and only if Benmosche shows us that 10% ROE is on the horizon. Until then AIG may trade sideways. For the (distant) future, AIG should be able to get 15% ROE and if it trades at 10x, then you get $100 per share. Not to mention that BV would be increasing all that time, so there is a good deal of upside from there. If it were to trade at 15x (which is historically not unusual at all), then you get $150 per share. These numbers are not ridiculous. They show the potential this stock has if only they can show improvements in operations.
The downgrade was unnecessary. The company stated to it is reducing cost, so why did she rehash the old P&C argument. The stock also reacted before the news in the AH market, so someone knew about the downgrade before today. Someone has been playing with this stock for a few months now. When the price goes up, they put out the same negative story about the P&C unit. Most investors had accepted the the fact that the company has more units which will make it plenty of money. The P&C argument was already defended here, she is a little delayed in her downgrade for some reason. Institutional investors are also adding to their position on any pullbacks, they are selling this stock. Only shorts are borrowing off investors accounts and selling into this bogus downgrade.