Berkowitz was a Pig on AIG (AIG), Sees Gains Evaporate
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Not too long ago Bruce Berkowitz of Fairholme Capital looked like a genius with his AIG (NYSE: AIG) position. Shares were double where he bought them, the company was selling assets at strong prices, operations were turning and the company was paying back debt at a record clip. Controlling 32 percent of the float, Berkowitz was having his way with the stock and that way was up.
Well there's an old saying on Wall Street: bulls make money, bears make money and pigs get slaughtered.
Mr. Berkowitz was... a pig.
The money manager should have dumped his stock before the government got a chance to dump theirs. Now he's sitting at a loss.
StreetInsider.com gave investors a stark warning on AIG in December, suggesting Berkowitz & Co. could have issues with the position as the government's stake grew bigger and bigger. Since then the overhang from the pending government stock sale has weighed on shares of AIG; shares are down more than 50 percent from the highs.
In a call with shareholders Monday, Berkowitz admitted to his mistake. From the Wall Street Journal Market Beat blog:
Today AIG is about 2% of its market price 10 years ago. The government wants to sell 1.6 billion shares with their cost basis around $29 per share. Well, I ask you, guess where the public offering will come, given the government is not in the business of making profits. My guess is around $27 to $29.
You could ask, why do we hold? Well, I was wrong. I found it very hard to believe the government would sell its stake below book value and right now AIG is trading at two-thirds of book value.
Well there's an old saying on Wall Street: bulls make money, bears make money and pigs get slaughtered.
Mr. Berkowitz was... a pig.
The money manager should have dumped his stock before the government got a chance to dump theirs. Now he's sitting at a loss.
StreetInsider.com gave investors a stark warning on AIG in December, suggesting Berkowitz & Co. could have issues with the position as the government's stake grew bigger and bigger. Since then the overhang from the pending government stock sale has weighed on shares of AIG; shares are down more than 50 percent from the highs.
In a call with shareholders Monday, Berkowitz admitted to his mistake. From the Wall Street Journal Market Beat blog:
Today AIG is about 2% of its market price 10 years ago. The government wants to sell 1.6 billion shares with their cost basis around $29 per share. Well, I ask you, guess where the public offering will come, given the government is not in the business of making profits. My guess is around $27 to $29.
You could ask, why do we hold? Well, I was wrong. I found it very hard to believe the government would sell its stake below book value and right now AIG is trading at two-thirds of book value.
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