American International Group Inc (NYSE:AIG) — Shares of AIG stock broke out last week, rallying more than 7% on Aug 3 after the big-cap insurance company beat analysts’ earnings estimates and increased its share repurchase program by $3 billion.
Following the earnings report, S&P Capital IQ Equity Research reiterated its “Buy” rating on AIG stock and upped its 12-month price target by $2 to $64.
Then, on Monday, Goldman Sachs added AIG stock to its “Americas Conviction List” with a $68 target. Benzinga noted the recommendation was due to AIG’s “increasingly attractive risk/reward profile.” The Goldman Sachs analyst also said the insurance company is closer to securitizing its life reserves, which could add $4 billion to $5 billion in additional capital.
Turning to the chart, we see AIG stock executed a breakaway gap on very high volume on Aug. 3 after the better-than-expected earnings report. This was followed by a strong buy signal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR). In addition, it sliced through its bearish resistance line at $56, which was coincidentally merged with its 200-day moving average.
Be aware that AIG stock is not in a bull market. The next challenge for shares will be the twin highs from November and December at $63 to $64. But the power of the Aug. 3 breakout should carry shares to my target of $68.
However, after such a huge breakout, stocks will often succumb to profit-taking. So, traders should look to buy AIG stock on a pullback to $58 with a trading target of $68 for a potential return of more than 17%.
Long-term investors should consider adding shares their portfolio for even higher capital gains and income. American International Group pays a quarterly dividend of 32 cents per share for a forward annual yield of 2.2%.
