the question is did he do so out of fear of the reaction to any sale, or greed about the true value of the stock? Good catch, either way.
The same thing is happening in reverse now. The warrants are gaining, on heavy volume, while the common is sinking. My sense is that volatility favors the "option" quality of the warrants. Also, the long term prospects of AIG remain solid, while the short term currency issues this earnings season are expected to impact earnings in the short term. Those are "after the fact" assessments though. I can't say I could have predicted this.
The company keeps bragging about how well they've hedged against rising interest rates. I'd agree the currency risk is moderate, but it is my assumption and hope that they've hedged their currency exposure just as diligently. You have to wonder though. How did something as transparent as the dollar's rise catch so many analysts off guard? Let's hope AIG dodges that bullet, but they're even less likely now to crush estimates as they have the last several quarters. I'm also curious to see how the new reorganization affects investor' perceptions. (Check out the recent 8K.) My sense is that they are trying to isolate their legacy "millstone" policies, so the positive affect of their new business is more prominent. Otherwise the new structure looks less logical and more complicated than the old.
Wish I was in there with you. I think my other investments need time to pan out first though. But if CBI still sleeps, when those take off, I'm right behind you. Be patient.
At current prices that gives them an instant 50% return on their/our money- tax free. Of course that all depends on whether you believe book value is real (I do) and that they can achieve the double digit ROE that will eventually justify full valuation (let's hope). Buybacks at current levels could add $2/shr per year to book, added to $4-$5 per year earnings, that's not too shabby.
I get it. Thanks to all who responded below. I have some homework to do about the tax accounting for goodwill write downs. They used to be written down in a linear manner, but sometime (Reagan administration?) they were allowed to keep goodwill on the books, subject to periodic review for impairment. The fact that companies did NOT want to write off goodwill suggests those write downs are NOT tax deductible. Management has an incentive to keep those assets on the balance sheet otherwise- which is why they put it off, until they are forced to acknowledge reality in massive fashion. For your sakes, I hope that doesn't happen. If it does though, I hope I'm in position to capitalize on the mayhem.
Good stuff. Thanks to all. I tell myself I only invest in things I understand. That's less true than I like to believe. Still, I'm not used to evaluating a whole country, much less two continents in geopolitical turmoil. I might take a small stake in a fund, as you suggest though. The 2% for expenses I'm guessing they charge is a minor consideration given these crazy valuations. A dollar is still a dollar, but making one comes with less "swag" when you know you gained it by sheer luck.
I get the idea of political risk, and appreciate your feedback and the replies below. But there's added risk for yndx. The Yahoo stats don't indicate a forward PE of .34- not by any stretch. That's even assuming the numbers are real. I've had bad experiences with inferior accounting standards for foreign stocks. You have to discount those numbers even if they are accurate. Might make sense for a small stake though, God knows my GNW turned out to be just as risky.
I'm not a tech guy, but I checked it out in deference to you. That .34 (now) makes little sense. The company would have to earn $51/shr next year to pull that off- unless they are selling off a business. The stock is at $17, book value $5. Making $51 seems like a stretch. Debt/equity ratios make no sense either. My guess is that some of the numbers yahoo used are in rubles. Russia is worse than small company oil. Unless you have a pair of eyes in the game, you're better off not playing. I'd welcome your analysis on this platypus. if you did any.
I worked in oil exploration for 9 years. It's extremely difficult to evaluate the cost per barrel to find and produce oil & gas. Every company makes estimates, and they all do it in a somewhat different way. Without solid comparisons of reserves and costs, you might as well throw darts at the stock page. This is one area where it pays to know insiders (they don't have to disclose confidential information to be helpful) or trust the professional analysts. In the latter case, you have no advantage over the pros. So why bother?
BTW, this discussion belongs on a different board. The fact that you posted that here undermines the little credibility you may have.
I thought they had to hold AER for 18 months before selling. Am I wrong, or did I just lose track of time? That extra $4B would allow them to raise the quarterly buybacks to $2-$2.5B. I can't see the virtue of holding AER as long as AIG's stock is selling so cheap.
"Consider the stockholder's position"? Are you kidding? 20 for 1? Try zero for 1. I've lost hundreds of thousands on more than a couple of stock investments, when the company went bankrupt, You'd never know it by the "don't worry, be happy" releases by management. Dozens of times more I've lost in the thousands on smaller positions under similar circumstances. I'm a teacher. That's real money to a guy like me. The point is not that I'm standing up for management. It's that I want them to manage my company in its long term interests. Right now, that means withholding dividends in favor of buybacks. Bonuses paid in 2007 &2008 were criminal, in my opinion. All I can do is hope they earn the ones they are currently getting, now that I'm a stakeholder.
I'm not in CBI yet, so your panic talk serves my purposes. But it's still not ethical. CBI, from my perspective, is like a snake that swallowed a pig. It will take time for them to work the merger through and clean up their balance sheet. But if they continue to make a profit and generate positive cash flow, these bargain prices will seem ridiculous in a few years. CBI may have gotten caught taking risk and debt just before oil crashed That still might work out in the long run though.
I'm not the guy to defend management bonuses. Try owning Home Depot 7 years ago, when Bob Nardelli gutted the stores and walked away with $ 210 million for his troubles. AIG is among common company when it comes to taking care of its own first. Bonuses incentives have become more rational in recent years, but American executives are still overpaid relative to their European counterparts- and the more overpaid they are, the less well run the company seems to be. I'm not making that up, There's data out there that proves it. So, I do applaud your outrage at management, but hefty dividends are not the solution to that problem. One reason that stocks seem to yield more returns that bonds is that shareholders are so easy to cheat. I've been on the losing side of that dynamic more often than I can count. Hopefully, you'll be rewarded in the end.
Dude, It's no fun losing money. I've lost most of my bankroll on more than one occasion. But you can only move forward from where you are. I think AIG has done a good job of that over the past few years. It's not the same company you lost money in. Nor can they make good on your losses with a wave of the hand, or a dividend the feds wouldn't allow anyway. They are building value in a prudent way, which is in the best interest of all long term shareholders. If you have to sell a few shares to meet cash flow needs, you'll probably still fare better than you would with an unsustainable dividend.
Management is not responsible for the stock market, they can only take advantage of it when it's wrong, which is what they're doing with the buybacks. Buybacks are better than dividends under these circumstances. The bailout is irrelevant, except to the extent the bad press is keeping this stock depressed. Management is buying shares themselves. Operations are very slowly improving. What would you have them do?
Still looking for an explanation of why the balance sheet blew up last year. Negative tangible book, half of equity as goodwill, I'm looking at CBI to rotate into eventually, but I need somebody to explain this mess. 26% ROE means nothing unless equity makes sense. Nobody coming forward with a link?
Here's a re-post, with the corrent buyback dollar amount. Apologies
At $50/shr, $1.5B only buys 30M shares- about 2% of float. The drop in price helps, but only adds a couple of pennies/shr to the book. Still, that softens the blow. I'll take it. Two percent per quarter over several years does move the needle however. in 4 years we could cut the float in half- especially if AIG maintains this discount.
Don't know exactly what caused this swoon. There are always plenty of "just so" stories that say more about our need for a story than genuine cause and effect. Hopefully, we'll drift back up into earnings.
Sorry I meant to type $1.5B.. I know what I was thinking anyway. The other numbers are right. God knows I've done that math in my head so often, I only saw what was supposed to be there. Apologies.