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Reducing my AIG holdings

June 4, 2014

There are a couple of ways of looking at AIG’s recent share price action year-to-date:

  1. The shares have lagged the market and have only been grudgingly dragged higher by the impetus of the market, or
  2. The shares have now broken out of their year-to-date trading range and will therefore now move higher.

I really don’t have any clue which of these two views are right. In fact I really don’t have any idea what AIG shares will do in the short-term. Yes, I do think they are still significantly undervalued vs. a market that looks to me slightly overvalued. But what is more important to me is that I set down a series of sell targets when I first purchased my AIG holdings and we’re fast approaching my first sell target. AIG was, until yesterday, about 1/3 of the total equity holdings in my ‘value’ portfolio, and although I think the shares are still undervalued, the confluence of my first sell target approaching and this concentration have convinced me to reduce my AIG holdings (somewhat to my dismay as I have become quite fond of my AIG shares). But there it is: the discipline of selling somehow trumps any aversion to selling (and potentially incurring taxes). So I’ve reduced my position by 20%, freeing up some cash for other investments. Well, that’s not exactly true as I already had over 25% in cash so technically I didn’t need to ‘free up’ cash in order to make some additional investments,  but I do want to keep my cash position up there in case of a market swoon. What new investments you might ask? Well, I’ve upped my position in Altius Minerals slightly as the share price has come down after the recent secondary. But I’m most interested in a liquidation situation, which, for the moment or at least until I take a position (or not,) shall remain nameless. As I’ve written before, I’m trying to move my portfolio away from equities that follow Mr. Market’s manic moves and back into the ‘Greenblatt’ areas of spinoffs, restructurings and liquidations. Along with the Fed, I’m getting rather nervous about the relative quiet in the market.

On another note, the Oil States International spinoff of Civeo Corp. took place as announced on May 30th. My original position is up about 10% so far and I’m targeting about another 10% return over the next 6 months (or possibly sooner). As I did no in-depth analysis of OIS or CVEO before investing (except for reading the spinoff documents of course) I really have no idea exactly how much the two companies are undervalued. I was attracted because of the nearness of the impending spinoff, where the shares were priced at the beginning of May vs. their trading range over the past 12 months, the presence of an activist investor and the potential for CVEO to become a REIT. While most analysts are focused on the CVEO portion of the spinoff, I think OIS may do equally as well. Just a little contrarian thinking. Now if I’d just looked at the National Oilwell Varco spinoff as well…

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