AIG

Despite a short term gloomy outlook, I have a penchant for insurance companies with wide economic moats, strong balance sheets and long term track records for increasing shareholder value.

I've mentioned some of my favourites that are currently trading at large discounts to fair market values (using discounted cash flow modelling):

1. Y Allegheny Corp.
2. BRK.B Berkshire Hathaway
3. MKL Markel Corp
4. AIG
   

AIG is one of the most hated companies out there right now. Google around the financial websites and read some of the comments made by retail investors ("dumb money") that reek of emotional content.

AIG's current management is likely to change soon and for good reason. Rather than focusing on short term mistakes/misjudgements that have a relatively small material effect on the intermediate term bottom line, one needs to look at strong free cash flows, global footprint (particularly well positioned in emerging markets) and a rock bottom share price. Dr. Paul Price's article summarizes how the market is irrationally discounting the stock due to short term uncertainty. A forward P/E of under 6 and trading just above book value, it doesn't come cheaper than this for a wide moat 5 star giant company being bought up aggressively by 14 value gurus.

Morningstar analyst has a few words to say about AIG: