We recently published a list of 15 Best Stocks to Buy According to Hosking Partners. In this article, we are going to take a look at where American International Group, Inc. (NYSE:AIG) stands against the other best stocks to buy according to Hosking Partners.
Hosking Partners was established in 2013 by Jeremy Hosking as an independent partnership that offers a single global equity strategy. The firm appeals to investors seeking long-term returns and innovative thinking employing a capital cycle approach to investing. It has a diverse set of stocks in its portfolio that belong to a variety of industries consisting of AI, shipping, and financial services, among others. Jeremy Hosking earned an MA from the University of Cambridge, after which he served Marathon Asset Management 26 years as a founding partner and lead portfolio manager. There he contributed to developing the capital cycle approach to investment.
In its recent blog about shipping, Hosking Partners believes that understanding the cycles in different classes of shipping and global trends is essential for successful investment in the industry. Currently, Shipping (covering the container, dry bulk, product tanker and LNG sub-sectors) represents 1.25% of the portfolio. Global trade has declined as a percentage of GDP since 2010 caused by deglobalization, accelerated by the COVID-19 pandemic and geopolitical instability from the Russia-Ukraine war. This trend, coupled with the energy transition, is expected to constrain future supply and increase commodity price volatility, benefiting shipping by enabling cross-border trade.
Furthermore, shipping is a significant emitter of CO2, accounting for about 3% of global emissions. Environmental regulations aim to reduce emissions, but uncertainty over future fuel technology deters investment in new ships, leading to a tighter supply. The industry’s efficiency, measured by emissions per tonne-km, remains high compared to other transport modes. The shipping industry is at a pivotal juncture, with significant transformations driven by AI, the energy transition, and ESG considerations.
Another industry that Hosking Partners talks about is copper mining. Copper is often seen as a barometer for economic health and is crucial for the energy transition, including electric vehicles, power grids, and wind turbines. Wall Street banks are optimistic about copper prices, forecasting significant gains. Citi analysts suggest that prices could surge to over $15,000 per ton in the next 2-3 years if a strong economic recovery occurs, while their base case projects a rise to $12,000 per ton with modest demand growth through 2025 and 2026. Bank of America has also increased its 2024 copper price target to $9,321 from $8,625, citing tight mine supply and high demand driven by the energy transition as key factors.
However, some experts are cautious. Colin Hamilton of BMO Capital Markets argues that commodity markets tend to self-correct, and if supply issues persist, demand may adjust, potentially leading to lower prices. Hamilton suggests that while high price targets might be temporarily achievable, adjustments in demand could follow. The market may see a modest surplus due to increased mined supply, which is projected to grow by 4-4.5%. This is largely driven by new greenfield and brownfield projects. Despite the near-term surplus, long-term scarcity is anticipated as regulatory and political challenges in South America could impede the development of new mines.
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A professional advisor helping a client with an insurance policy, highlighting the company’s attention to customer service.
American International Group, Inc. (NYSE:AIG)
Hosking Partners’ Stake Value: $85,237,023
Percentage of Hosking Partners’ 13F Portfolio: 3.15%
Number of Hedge Fund Holders: 61
American International Group (AIG) is a global finance and insurance corporation operating in over 80 countries. The company has three main business segments: General Insurance, Life & Retirement, and a standalone technology-enabled subsidiary. The General Insurance division covers Commercial and Personal Insurance, as well as U.S. and International operations. The Life & Retirement segment includes Group and Individual Retirement, Life Insurance, and Institutional Markets.
American International Group, Inc. (NYSE:AIG) is an insurance products provider for commercial, institutional, and individual customers. It reported strong results in Q2 2024, with a 38% year-over-year increase in adjusted after-tax income, reaching $775 million. The company’s homeowners insurance benefits from its scale, offering features like high deductibles up to $10,000. AIG is focused on achieving a return on equity (ROE) of over 10% through disciplined underwriting, expense management, and capital optimization.
The company has also made strategic progress by selling its stake in life insurer Corebridge and repositioning its portfolio through various divestitures. This business turnaround is expected to support AIG’s future growth. The company’s earnings growth is anticipated to come from its emphasis on underwriting excellence and strict expense control. The repositioning of its underwriting portfolio has allowed AIG to achieve high-quality growth in both admitted and non-admitted markets, with multiple avenues to deploy capital towards the best risk-adjusted returns. Analysts at BMO Capital Markets have raised their price target for AIG from $88.00 to $89.00 and rated the company as “Outperform” on May 13th.
ClearBridge Value Equity Strategy stated the following regarding American International Group, Inc. (NYSE:AIG) in its first quarter 2024 investor letter:
“One example of our internal return engine is our continued large position in American International Group, Inc. (NYSE:AIG), which we have owned for roughly 10 years. We originally bought AIG at a greater than 30% discount to our initial estimate of business value. This entry point assumed minimal improvements in the business but allowed us to absorb some inevitable downdrafts along the way that we took advantage of to build our position. The key, however, is that during this period AIG management dramatically improved their business. The company has compounded intrinsic business value per share at a double-digit rate by reducing risks as management overhauled their underwriting process, strengthened their balance sheet, cut expenses and operational complexity and structurally improved returns on equity. A major source of added lift came from intelligent capital allocation: shares outstanding have been more than cut in half during this period, as management bought back roughly 5% of the company annually below intrinsic business value.
However, this valuation-driven return engine can only create so much lift on its own. We are always looking for big opportunities to create external lift in our returns from dramatic shifts in markets. The first comes from exploiting market extremes, where the long-term probabilities are very much in our favor, while the second comes from investor underreactions to big shifts in pricing power that can be exploited through our valuation-driven lens.”
Overall AIG ranks 4th on our list of the best stocks to buy according to Hosking Partners. While we acknowledge the potential of AIG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AIG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
