Gary Courts Controversy ...

04/22/2005 12:00 am EST


Gary Alexander

Senior Writer, Navellier & Associates

Gary Alexander will host the InvestorPlace Panel in Las Vegas, a "must" on everyone's Money Show agenda. In addition, in his own workshops, he offers his decidedly independent thinking, as can be seen from his latest on troubled insurance company, AIG.

"You’ve seen the headlines regarding American International Group (AIG NYSE). In mid-March, its long-time CEO, 79-year-old Maurice Greenberg, was forced to resign. Then, CFO Howard Smith took an unexplained leave of absence. Then, the company said it would delay filing its annual financial report, since it faces regulatory probes into its accounting practices, in particular a re-insurance deal with General Re, a unit of Berkshire Hathaway. AIG’s new CEO, Martin Sullivan, is trying to quantify and account for any discrepancies, before regulators force the company to do so. But AIG is a big company, and putting together all of its past paperwork for any particular accounting question can take months.

"By the time you read this issue, there may be more headlines that cause you to wonder about the company’s future, but I advise you to buy shares now, before knowing ‘everything’ there is to know about alleged problems at the giant insurer. If we wait for all the news to come out, we would miss the first gains, which usually happen very quickly after any good news. I prefer to look at the bigger picture.

"Here’s a company that has had only two CEOs in 85 years. Maurice Greenberg is a classic American success story. In 1952, he knocked on the company’s doors, as a Korean War veteran who wanted to use his Asian experience to market insurance to that region of the globe. He rose to the top spot within 15 years and was CEO for over 35 years. AIG has grown phenomenally under his leadership. This isn’t a web-of-lies business fiction, like the dot-coms of 1999, or one of the giant newcomers of the 1990s, like Global Crossing or Enron. This is not an opaque scam like Enron. But in this era, any whiff of ‘accounting change’ brings Enron-like howling.

"Here’s an organization of 86,000 real people. Greenberg’s greatest act came in the end – bowing out, without rancor. Because of his past labors, he has created a company in which nobody, not even Maurice Greenberg, is indispensable. AIG is entering a period of growth engineering. New CEO Martin Sullivan is only 50. If he works past age 65, AIG will have had only three CEOs in its first century of life. AIG is cheap, at only 11 times this year’s depressed earnings. I’d keep buying it at any price below $65, but grab it under $60 while you can. From $55, I expect we can double our money in AIG within 3-5 years, with minimal risks."

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