American International Group (AIG)

(Top Pick Feb 24/15, Up 4.86%) He looks at ROE. They always had a tendency to go north of 10% and they are headed there now. It had a good run and then pulled back. Around the mid $50s it looks good.

What they have earned over the past year has been tremendous. They have a triple whammy. They are buying back stock, reducing debt and increasing dividends. Insurance is a black box and very hard to figure out, but with this black box he knows that the NAV is $75-$80 a share. With the stock price at only $60, he is going to continue to buy until it is trading well above BV.

The problem child of the financial crisis. There is an astonishing difference now when you look at their balance sheet. It is a stock that has a lot of upside potential from a price to book basis. It is three thumbs up, but it has some technical resistance at $64. He likes the stock as he does insurance companies in general.

(Market Call Minute) His single biggest position. They have a lot of opportunity for optimization of their financials. Insurance is a great sector in the US right now.

This came out of the 08-09 debacle as a new company, a property/casualty insurer. It has done well for him. Yield curve is starting to steepen, and for an insurer, that is a good thing. They make most of their money off their portfolio, which is almost entirely in bonds. There are some good things happening at this company.

(A Top Pick July 23/14. Up 9.09%.) Basically an insurance company that is trading at a pretty stiff discount to its BV. This is not a fantastic business in a low interest rate environment, but the 10%-12% return on equity is not bad. They generate cash and have bought back a lot of stock. Thinks there is still room for it to go up. Discount is 30% to BV. He is going to hold for another year or two.

Continues to be somewhat punished by the market for the sins of 10 years ago. Trading at 75% of tangible Book Value. If interest rates go up, companies like this make more money. This is a value play in that you are getting it at less than BV, and it is a play on future earnings growth is interest rates go up. A good counterweight to stocks which are sensitive to higher interest rates, such as utilities, telcos and REITs. Yield of 0.85%.

(A Top Pick April 30/14. Up 10.28%.) Thinks the market is cautious on this because of the troubles they had in 2008. He still believes there is a bit of a wait-and-see attitude on it. Well-managed. From a fundamental standpoint it is quite attractive, trading at about 10X earnings. Off the 2008 situation they have a tax credit, a deferred tax account, which is worth $7-$8 a share. The property/casualty area is quite constructive.

(A Top Pick March 27/14. Up 18.08%.) One of the biggest insurance companies globally. Good management. Buying back stocks below Book Value. Still a Buy.

Metlife (MET-N) or American International Group (AIG-N)? These are 2 relatively different companies. This one has a large life insurance component, but MetLife is almost all life insurance. Looking of valuations, they are both pretty attractive. Both valuations are pretty cheap.

(Top Pick Mar 27/14, Up 13.66%) 70% of income is from investments. It has not done as well as he thought it would as interest rates went down. Recent downturns were due to interest rate drops. He has confidence that they will increase earnings 5-10% and then the stock should get re-rated.

He likes this. It is coming out of the mess of 2008 and becoming a traditional property/casualty Company. Sold off their aircraft leasing operation. Trading at about 10X earnings and only about 75% of BV. Very good value. The future is bright.

There are some interesting tailwinds that he sees in their balance sheet. He thinks you could see this continuing to grow. Book Value had a recalibration in the last 2 quarters. Growth in Book Value is what you are looking for in companies like this. Yield of 0.91%.

Has been interesting, because he likes the long-term breakouts. This one broke out a couple of years ago and is now back into a bit of a holding pattern. Sees pretty good support at around $48. In technical analysis, you have to watch the highs and lows. The last low was around $48. If it doesn’t break that, you are still in a bull market. As long as it doesn’t break $40, he is not selling his holdings.

Hasn’t done a whole lot from a price standpoint, but the company is making really good strides. The former CEO did a fantastic job bringing it out of the 2008-2009 malaise, and turning it into a much simpler property/casualty insurer. Thinks they will do well over the longer-term. Trading at a very reasonable multiple. Have a deferred tax account, which is worth probably $7-$8 as share. Trading at only 65% of Book.