Is AIG Turning A Corner?

Seasoned large-cap value investor Saul Eisenberg loves a real bargain, especially those that the Street has cast aside -- such as American International Group (AIG ), which New York Attorney General Eliot Spitzer and the Securities & Exchange Commission are investigating for accounting fraud. Since the massive probe began in February, shares of the giant global insurer have plunged -- from 73 on Feb. 11 to 50 by Apr. 22.

Eisenberg, of M&R Capital Management, started buying in March, when AIG was at 56. Although most investors still view it as fraught with risks, Eisenberg sees AIG as a steal. "Crunching the numbers to get the probe's worst-case impact, we saw that AIG was way oversold," he says. He sees the stock, now at 60, hitting 75 in a year. Prior to AIG's five-year restatement of its financial results, the Street had expected the company to earn $5.24 a share in 2005. Recently, William Wilt of Morgan Stanley (MWD ) (which did banking for AIG) upped his 2005 forecast to $5 a share from $4.80, and his 2006 forecast to $5.40 from $5.35. He says it is increasingly likely that AIG will recapture business momentum. Bijan Moazami of investment firm Friedman, Billings, Ramsey Group (FBR ) says the foreign life/retirement services unit -- 29% of AIG's total revenues -- will be a key driver in its overall growth. Overseas operations are growing fast, particularly in Japan, India, and China.