Okay let me present the graph for AIG, then we’ll discuss why I’m wondering “Is AIG the Stock for the future”!
Wow have you even seen a stock go from such a high valuation to almost a flat line kind of valuation? Kind of scary (luckily Halloween is around the corner!), huh.
And the kicker for this stock is that it doesn’t even have a dividend yield anymore, not to mention the huge reverse stock split it went through in 2009! Seems like this stock is a huge LOSER! Since it doesn’t have a dividend, it’s obviously not a good candidate as a stock for building a “Dividend Stream For Entertainment“, so why am I looking at it?
Because it still has huge “Lottery Ticket” potential!
A reinstatement of their dividend might happen…, although even if it did, there is a good change that it would not be a high payout amount since it wasn’t previously. But for me, I’m more interested in the capital gain potential! My plan is simple, buy a $1,000 worth of shares, and hold it for 5 to 10 years and hope that it increases 500% to 800% (or more) over a 5 to 10 year time frame!
If the stock increased 800% from the current price level ($35.90), that would mean that the future price would be $287.20! So that would mean that if I had $1,000 worth, it would grow to $8,000! While it’s a long shot, it has merit! Let me explain my slightly twisted logic.
- During the “Great Recession”, AIG got hit especially hard since it was one of the bad boys of the entire ordeal! It was so bad, that they US government had to bail them out by buying shares of AIG so that at one point the US government owned over 92% of the company! WOW!
- Today, the US government owns 22% of the company! This is a far cry from the 92% the government use to own! A nice side feature is that the government should end up making a very healthy profit from the bailout payback!
- Once the government sells the rest of the stock, the price should climb substantially! That could mean that the stock price might soar in the near future (perhaps in a few years?)
- The company is refocusing on it’s primary business (insurance) which in and of itself is quite profitable.
- If the company even climbs back to 25% of its previous valuation prior to 2008, we would be very, very happy!
Now for the tie in to a Dividend Stream for Entertainment!
After the US government sells it’s remaining shares, there is a good chance that AIG will reinstate it’s former dividend. If the stock the increases over 800%, this dividend yield would more than likely also increase substantially. If AIG doesn’t reinstate their dividend, but still has the capital appreciation in the stock price, perhaps at some future point, we’ll sell the stock and buy real estate, thus getting a income stream for entertainment that way.
Either way, a small investment of $1,000 has a lot of potential for room to grow, and that’s what are are going to do.
Are you wondering “Is AIG the stock of the future” too? Tell me what you think!
Disclosure: We both (son and I) have a small position in this stock and we are long on the stock.