This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

AIG's 'Zombie' Stock Will Kill You

Stocks in this article: AIG ALL MET

( Updates to add details of Moody's report.)

NEW YORK ( TheStreet) -- The direction of American International Group (AIG) for speculative investors rode largely on third-quarter results. Now that they're in, here's the verdict: Dump the stock.

AIG is overpriced, and the risk is no longer factored in. It should be a $10 stock, not one that sells for $36. Zombies have become a theme in books, movies and publicly traded companies, but AIG is one zombie stock to avoid.

When the government bailed out AIG, investors should have bailed. Some day traders have made a killing, as the stock alternately rose and fell 50% from one day to the next.

Aside from the fact that AIG isn't performing as well as the headline profit figure would have you believe -- and we will look at that in a minute -- the insurer's stock is selling at an incredible 96% of book price, according to SNL Financial. That's completely inappropriate for a stock with this level of risk exposure.

Until the third-quarter figures were crunched, AIG's problems weren't so obvious. The price-to-book-value last week was about 34%, arguably an appropriate level for this stock, reflecting the risk inherent in owning it.

Now, the book value has been reduced significantly, and the price-to-book-value has risen exponentially. Even after a drop of close to 10% on Friday (and a 2% increase yesterday), the price-to-book-value of 96% yesterday should send a "sell" signal to anyone still holding the stock.

Most Commented Today Most Popular Today
Avoid Sirius XM Motorola's "Troubling" Droid Sales

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs