Citigroup (C)

[rhinodude47]

I am not as well educated as a lot of the other members here but I think I found a stock worth mentioning. Citigroup I believe released earnings today and the stock closed at what I believe are multi year lows.

Short candidate?

[Airelon]

Perhaps someone better and more apt in the short stock game than I, can help you out here mate. Although I see the reasons for doing so? I think all traders have what I call a lifetime bias. What can I say? I'm a bull. When it comes to shorting, the only thing I love to short is a commodity . . .

[Stocktrading101]

I think you have pretty good odds on Citigroup as a short. Really anything in the financial sector is free game, just make sure to use tight stops and protect yourself from upside exposure which in the case case of shorting is bad.

[Fredledingue]

IMO, it's crazy to short a stock at a multi-year low, even more becauseit's at a multi-year low.
C could come close to oversold due to panick selling.
True the news are not good for them and for any bank, but it's price per share has fallen 36%, which is huge for a behemot like C. Now the P/E is 7.6, after this summer's losses. The dividend is 6% and it will be surprising that they cut it.
If they cut the dividend, that will pull the stock much lower but they won't do so unless they are dangerousely in the red and they still make lot of money. Companies cut their dividend when they start losing money, that's why I say it would be surprising.

Long term, C and banks won't have to write off anymore or lose money on bad mortgage papers because the financial entities are very concious of the issue and have reacted well on time. In one year, this crisis will be History.

If C keep on falling like crazy, it will be a good oportunity. It will certainly be back over $40 in 6 to 12 months.

[Fredledingue]

Yep, I was wrong.
In fact the PE reported by Y! Finance refers to result dating fro june 2007. I don't know why because they posted more recent results one month ago. Y!Finance is far from reliable it seems.

Nevertheless, I think the bottom is near with this bank or at least, there won't be spectacular falls anymore.
Not a good time to buy. I'd wait another 6 months for that.

I take the analyst estimate of a 15 Billions potential loss with a grain of salt.
C stated that 11 was a maximum.

[lippy]

Originally Posted by Fredledingue

Yep, I was wrong.
In fact the PE reported by Y! Finance refers to result dating fro june 2007. I don't know why because they posted more recent results one month ago. Y!Finance is far from reliable it seems.

Nevertheless, I think the bottom is near with this bank or at least, there won't be spectacular falls anymore.
Not a good time to buy. I'd wait another 6 months for that.

I take the analyst estimate of a 15 Billions potential loss with a grain of salt.
C stated that 11 was a maximum.

If you wait another 6 months, you wouldn't make a huge gain. But you are still a bit save and that makes it a conservative investment.

C at $33 is just a great bargain. Assume that C takes another 15 billion write off, the valuation is still above $40. So there is about 20% margin of safety. For a behemoth like C, it is surprising anyone is foolish enough to clean their C portfolio.

It would take just 3 years for it to reach their "average" price, above $50. If you add with dividend ( Iam sure C would not cut its dividend, they want to preserve the good dividend history), the return is above 15% compounded annually.

The only bad fact is that the management does not look to be kind to shareholders. Compensation is high, Turnover is increasing. It shows the company lacking respect and direction.

[Fredledingue]

I agree but had you bought yesterday you would have lost 3%, on bad timing.
C might be a great bargain, but it could be an even greater bargain later because...

-Nothing shows that the subprime crisis is over. In fact deliquency is just starting since many of low mortgages have not been reset yet. The accountants and the market have probably already priced out that, but the news of increasing delinquency in the next few months will pull bank stocks down again.

-Nothing shows that the economy will strongly rebound. Actualy they project a sharp drop in annual growth this quarter

-The Fed may be slow to cut interrest rates due to high oil prices

-Winter is not a good season for stocks.

==> While C, and other banks are bargain on a book basis, it doesn't mean the stock will rise. Of course it all depends on the valuation. If C falls as low as $25, it will be a bargain in absolute terms. I think it can fall to $25.
Also if you wait until april or march next year, you may miss the bottom but you won't miss the recovery neither.

$33 is a good entry point, but keep some cash for buying at $25 or lower, in case it goes further south.

[Fredledingue]

Originally Posted by U.S. Treasury Secretary Henry Paulson

The number of potential home-loan defaults "will be significantly bigger" in 2008 than this year.

Source

And some bank shares could be significantly lower in 2008 than this year.