3 Undervalued Stocks: American International Group Inc (AIG), Seagate Technology PLC (STX), Starwood Property Trust, Inc. (STWD)


As earnings season started to accelerate, there are analysts and investors who are seeking to find the stocks that are worth investing. It is quite natural to have a portfolio where there are different sectors are there rather limiting to one sector like IT or one company. There are three companies, American International Group Inc (NYSE:AIG), Seagate Technology PLC (NASDAQ:STX), Starwood Property Trust, Inc. (NYSE:STWD), which are currently undervalued based on a ModernGraham valuation. These stocks have the potential to deliver better returns in the upcoming quarters. These stocks might be of interest to enterprising investors who are adopting the approach of Modern Graham as the defensive investors would be wary of growth opportunities.

American International Group Inc (NYSE:AIG)

The stock may not be a worth watch for those who wants to be on the defensive as they were worried over the lack of earnings uptick or stability in the last one decade. On top of it, the company’s track record on dividend was not consistent to attract defensive investors. However, it has every other quality that enterprising investors would be looking for. Of course, it was applicable to those who follow the pattern of ModernGraham which is based on Benjamin Graham’s method, as they would be comfortable with it compared to other available opportunities.

As far as valuation is concerned, American International Group Inc (NYSE:AIG) shares are undervalued following a growth in its EPSmg (EPS Modern Graham) and normalized earnings, from a loss of $109.06 suffered in 2011. In the current year, the insurer is predicted to gain $5.36 earnings per share. This type of demonstrated growth was considered higher than the implied estimation of 1.66% earnings growth. That leads to the ModernGraham of  around $206.31, with a more conservative value of $77.70 with 3 percent growth implied.

Seagate Technology PLC (NASDAQ:STX)

This is one more company that is eligible for enterprising investor. The stock has had a lack of earnings growth in the last ten years and the dividend history besides the high PB ratio. However, there were some concerns about the debt levels compared to the current assets. Despite this, the stock is a fit stock for the ModernGraham model meeting most of the criteria.

Seagate Technology PLC (NASDAQ:STX) is termed as undervalued following the growth of its EPSmg, i.e. normalized earnings to estimated earnings of $4.63 a share in the current year from $2.39 a share recorded in 2012. This type of demonstrated earnings upside outpaced the market implied projection of annual earnings growth of 1.11% in the next seven – ten years. The valuation of ModernGraham model provides a return of an estimate of built-in value of above the market price. The storage maker is scheduled to announce its results on October 20.

Starwood Property Trust, Inc. (NYSE:STWD)

The stock is certainly not for defensive or the conservative investors. That was because they were more worried about the short history of the stock. However, the stock is good addition for enterprising investors as it has all the necessary factors. This is for investors willing to overlook a stock that hasn’t passed all criteria.

Based on the ModernGraham formula, Starwood Property Trust, Inc. (NYSE:STWD) shares are undervalued following its EPSmg growth to a projected earnings of $1.908 a share in the current year from 76 cents share recorded in the year 2011. It was normalized earnings that showcased growth that was better than the market implied projection of 1.18% earnings uptick. That would lead to a return of the built-in value of above the market price. MG valuation suggests a price tag of $76.15 for the shares of Starwood Property Trust. The company will announce its quarterly numbers on November 5.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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