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Whitney Tilson: AIG Seriously Undervalued

Value investors scour the market for stocks that they believe are trading below intrinsic value.

And straight from his latest Value Investing Congress, value investor Whitney Tilson tells us that AIG looks like a stock that’s significantly undervalued.

Tilson, who is the founder of T2 Partners and a CNBC Contributor, concedes the company has had its woes – but he thinks the company has turned a corner and the Street doesn’t know it yet.

“AIG has really transformed itself from one of the most complex businesses in the world to one that’s actually quite simple and easy to understand,” he says on CNBC's Fast Money.

And after sifting through the balance sheet and crunching the numbers, Tilson believes AIG is trading at a 41% discount to tangible book value today.”

That’s a metric that value investor Karen Finerman calls “intriguing.”

And although the government plans to sell out of its stake, Tilson doesn’t think the overhang will depress the stock signifcantly.

“The company is buying back bucket loads of shares,” he says.

Tilson thinks if the stock gets too cheap, AIG will step in - and "buy back a ton of stock at a discount to its book value."

And Tilson adds, the government overhang is only temporary. “We expect there will be no government ownership within 1 to 2 years.”

That’s not to say Tilson doesn’t expect the stock to go through some fits and starts – he does. It’s just that he thinks ultimately the path of least resistance is higher.

“I can’t tell you what the great tipping point is - when investors stop worrying about government overhang and start focusing on the stock that’s super cheap – I can’t give you a day and date - but when that happens I think the stock could move very quickly."

All told he says, "I think it has 50-120% upside in the next year or two.”



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Trader disclosure: On May 7, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Karen Finerman is long AAPL; Karen Finerman is short AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long NFLX; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long RIMM; Karen Finerman is long HPQ; Karen Finerman is long DIS; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDX; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Steve Grasso is long ASTM; Steve Grasso is long AVAV; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long NUAN; Steve Grasso is long MO; Jon Najarian is long MAKO; Jon Najarian is long RAX; Jon Najarian is long WYNN; Jon Najarian is long call spreads AAPL; Jon Najarian is long call spreads CIEN; Jon Najarian is long call spreads GS; Jon Najarian is long call spreads FFIV; Jon Najarian is long call spreads FIO; Jon Najarian is long call spreads NFLX; Jon Najarian is long call spreads AH; Jon Najarian is long call CIGX; Jon Najarian is long call CBOE; Jon Najarian is long call CME ; Jon Najarian is long call DDMG; Scott Nations is long SPY; Scott Nations is long C; Scott Nations is long BAC; Scott Nations is long HSII

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