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Join in on the discussion with other like-minded investors in our community forums. Learn about the fundamental investing methodology and participate in educational workshops in the Investing forums, stay up-to-date on StockCentral news and make suggestions to the StockCentral team in Central Square, and discuss your favorite stock or recent market news in our A-Z ticker-based forums.
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Mark Robertson
Rochester Hills, Michigan
www.manifestinvesting.com
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| 01/25/2007 3:39 PM |
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The fourth selection in my "25 Stocks & Beyond" portfolio is American Intl Group (AIG).
The view from the doormat isn't looking good -- but I keep reminding myself that it's so
very early while I cry myself to sleep. With Gerlach out of the gate going 3-for-3 on
stocks beating the market and Ralph and Ellis each have stocks that have gone up at
least 10% during January, I keep hope alive.
AIG is a "special situations" selection, and frankly -- I'm a little concerned that the
party is getting a little long in the tooth. Although very little has changed from my
selection of AIG for my CAPS portfolio back on Halloween 2006, the stock price has been
on quite a roll. I'll update that selection with some current highlights.
The 2006 stock price trend for AIG suggests that Mr. Market is beginning (or has begun)
to forgive the company for the transgressions that riled AG Spitzer and had him foaming
at the mouth.
And even if Mr. Market has little or no compassion, perhaps the short-term memory is
weakening? In any event, AIG is a capable company, rated "A+" (98% at MANIFEST) for
financial strength. With shareholder equity growing at approximately 12%, an ROE of
13% -- there's some room for P/E expansion from the current P/E of 11-12x and a
potential upside to 18-19x. The projected annual return (PAR) is 19.5%, suitably
promising for a long-term portfolio with a label like "beyond."
My 5-year forecasted EPS is $8.81 and with a quality rating of 70.8 -- AIG ranks as
"excellent" in the top quintile of all companies.
Put down your SSG and think about the EPS expectations. The analyst consensus
estimate for EPS growth is 12.8%. Now pick up your SSG and focus on the EPS
expectations like Tiger Woods approaching a putt. If you believe that 11-13% EPS
growth is feasible along with a P/E of 18x -- AIG would most likely outperform the
total stock market over the next five years, no matter what the sources of income
and loan loss provisions are for the stock.
No SSG on this one. And if you do one, focus like a Tiger on the EPS trend & forecast.
Mark Robertson
provisions for the
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Rajiv Roy
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| 01/25/2007 9:39 PM |
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>>No SSG on this one
No worries, I will do the honors. 
I used $8.81 as the 5Yr EPS forecast. Came to a 17.71% EPS growth. Projected Annual Return came to 19.5% close to yours based on the latest price.
I used the lastest AIG.SSG file courtesy stockcentral.
http://www.stockfundas.com/home.aspx?cmd=cmdRcvTckAnl&frmUsrId=3&tckId=472
You can ofcouse copy the analysis to your own portfolio on stockfundas and play with the 11-13% EPS growth.
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Rajiv
www.stockfundas.com
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armin fields
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| 01/28/2007 3:50 PM |
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Mark, you estimated EPS to grow to $8.81 which Rajiv worked out as 17.17% on his SSG (projecting from last annual), but you also say the consensus EPS estimate is 12.8%. Soooooooo, why did you exceed the consensus by so much?
By the way, Take Stock (on line) estimates AIG's future EPS growth at 4.10% or $4.89 in 5 yrs. Does anyone know why it's soooooo low?
Armin |
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Armin Fields
check out my SSG blog at
http://stock-analysis-with-ssg-and-pert-a.blogspot.com |
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Mark Robertson
Rochester Hills, Michigan
www.manifestinvesting.com
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| 01/28/2007 4:18 PM |
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Thanks for the question, Armin.
Why did I exceed the consensus by so much?
Answer: From my perspective, I didn't. I can't speak to the 17.2% EPS growth
rate on the SSG other than to suggest that sometimes the "paper form" and
methods of calculation are vulnerable to "smoky views" of things.
My personal EPS growth estimate would be approximately 8.5% based on:
FV = $8.81
PV = $5.85 (current EPS)
n = 5
I also can't answer the Take$tock query other than to say, "It's not what I see."
Best wishes and Better Investing,
Mark Robertson
www.manifestinvesting.com
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