Vitaliy’s Contrarian Edge

What does Hank know?

January 22nd, 2008

Hank Greenberg, the ex-chairman of AIG (AIG), the guy who made AIG what it is today, hired an investment banker to help him figure out what the company is worth.

He is thinking about unloading the stock. If Hank doesn’t want to own this financial conglomerate - and he knows a lot more about its businesses than you and I ever will - should an average investor own it??

I looked at AIG awhile back, it looks incredibly cheap on price to reported earnings, but its balance sheet has $40 billion “other” lines. Is it “other” good stuff or bad stuff? I don’t know. In today’s environment it’s likely to be the latter.

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Entry Filed under: Analysis & Research

3 Comments Add your own

1. Tom L | February 4th, 2008 at 3:51 am

Mr. Vitaliy, I read your Barrons article this weekend. I have a question.

You use profits margins to normalize PEs. The measure you use for profit margins is margins as a percentage of GDP. Why don’t you look at pre-tax profit margins (calibrated to revenue instead of GDP)? Why use U.S. GDP instead of global GDP?

The conclusion probably won’t change here but it is more accurate to look at pre-tax margins.
2. Vitaliy | February 4th, 2008 at 4:22 am

Tom L

Result is the same. I posted both GDP and GNP charts.
3. Josh | February 11th, 2008 at 6:56 pm

I hope AIG’s “other” earnings can pass inspection by accountants….