Mensajepor DonEdward » Mié Mar 10, 2010 10:05 pm
U.S. Equities
AIG's Progress Squeezes Shorts
Kelsey Swanekamp, 03.10.10, 04:15 PM EST
Rounding up more than $50 billion in asset sales set off a chain reaction in the insurer's shares.
American International Group Inc 03/10/2010 6:04PM ET $36.24 + 10.59%
Recent asset sales are good news for American International Group, but short selling investors have been buying back shares as the stock appears to be in the midst of a short squeeze.
With the stock rallying on news of the company's successful efforts to offload a pair of highly sought after assets, investors who had shorted the government-aided insurer have been forced to cover their positions.
"The short sellers have been making big bets on the downside for AIG ( AIG - news - people )," says Dylan Wetherill, founder and president of ShortSqueeze.com, but AIG began to stabilize after selling off assets and forced short sellers to rethink their "bearish sentiment" on the stock.
Short sellers borrow shares to sell into the market, betting the price will drop and they will be able to buy the shares back at a lower price and pocket the difference. But as AIG began to rise sharply in recent days, a spate of short-covering promptly drove the stock even higher.
"As soon as a stock like AIG begins to gain strength, the short sellers begin to suffer losses and initiate large buy orders to prevent further losses," says Wetherill.
The insurer soared 10.6% to close at $36.24 Wednesday to bump its gain over the past five sessions to nearly 45%. In addition to over $50 billion raised by selling insurance units Alico and AIA, AIG could reel in another $490 million from the sale of its stake in Transatlantic Holdings ( TRH - news - people ).
Wetherill says the rally could also mark a shift in psychology in the market. "Watching the short sellers turning bullish in a stock like AIG is a huge boost to the overall confidence of the market, and a powerful symbol of what is on the horizon," he adds.
Morningstar analyst Bill Bergman agrees. At the very least, he says, "there's less fear."
Nearly five times the normal volume traded Wednesday with more than 57 million AIG shares changing hands, spurring speculation that a giant short squeeze was fueling the advance.
“External forces that hurt AIG on the way down are improving,” says Bergman, who cited improvements with other mortgage guarantors, such as Radian Group ( RDN - news - people ). Still, Bergman warns that AIG share price could "react violently" to small changes in the market.
pd; hay menos miedo, se va dejando atras el sentimiento negativo sobre el pelpa, corrida de vendidos...en fin..
seguimos up..
wait and see ...
