In the long term, I’m not especially interested in owning Citigroup (C).
I think the bank’s consumer banking business, once it’s strength, has turned into an also ran. Its capital needs forced it to put its Smith Barney brokerage business into a strange joint venture with Morgan Stanley (MS). And what was once the best global name in banking has been seriously tarnished by the financial crisis and the company’s near death experience.
Ah, but in the medium term, it’s a different story. The bank is clearly on its way to a modest recovery in earnings power as a gradually improving loan book lets the bank reduce loan loss reserves. In the third quarter, for example, which the bank reported on October 18, Citigroup announced the release in $1.96 billion from reserves against loan losses.
And CEO Vikram Pandit has told Wall Street that he expects to be able to begin returning cash to shareholders—either in the form of a dividend or stock buybacks—in 2012. (Which would mean that the Treasury has its remaining stake in the bank.)
But one of the most intriguing possibilities (one I mentioned in my post https://jubakpicks.com/2010/10/22/u-s-banks-big-problem-even-after-the-recovery-wheres-the-growth/ )is that someone, most probably a big U.S bank, decides to buy Citigroup for what remains, despite the damage, one of the top bank franchises in emerging economies. The bank still has a tremendous banking network and very high name recognition in these economies. (And, of course, there’s also the possibility that Citigroup decides to keep this network and grow it, giving this bank a share of global banking growth markets that other U.S. banks don’t own.)
Maybe the only thing Citigroup doesn’t have going for it is a good chance to produce a positive return for an investor in the near term—say, the next six months—if the U.S. economy weakens. (And I’d assume that the current mortgage foreclosure mess won’t be kind of Citigroup shares, either. But that’s why the current price makes it an attractive buy.)
As of October 26, I’m adding this stock to Jubak’s Picks with a target of $5.25 by June 2011.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. For a full list of the stocks in the fund as of the end of the most recent quarter see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/ )
Dear Readers………let us remember just how smart Mr. Jubak is not……………He is one of many who said C & BA were going to be nationalized and scarred the hell out of investors…..listening to a guy like this is like listening to a new born child……..he is paid to write about what he has no clue about…..so be very careful about anything this man may say……..he has been wrong many times and will continue this pattern of ill conceived stock knowledge based on very little if any in depth research……….and now he recommends C……who is this guy really…….
Jim, you have spoken well of C, JPM and HSBC. So,….. how do they stack up against each other?
Thanks
the banker or Jim,
Do you series think Citi shares will double once the treasury sells it’s position. Please feel free to give your thoughts
thx
I remember when REED was in charge and no other bank had the computer skills of citi.
they should grow the domestic branch system.
once treasury sells out its position I see a double your money in threee years
Regarding the financials, Jim has a great presentation at MoneyShow, see the Global Financial order video.
Looks like there is some sort of correction today, but a number of Jim’s picks are holding up pretty well, inlcuding Coach, USB, JCI. Coah was dipping below 49 but now rallied solidly so I think it should be OK.
Citigroup?! I’m still watching the shares of JPM I bought on Jim’s recommendation go down and down… I’m staying away for any more financials!
I continue to hold shares in Citi and will give it some time. I sold BAC and, rather reluctantly, JPM. After this mortgage repossesion mess plays itself out I probably will buy JPM again, if the price seems right. If BAC gets down below $3.00 a share, I’ll buy that too, mess or not.
Think clean water is important? Buy NLC.
Jim I have 2 questions. First, why buy Citi now do you think the mort. buyback will not cuase further price erosion? Second, what is your view on the companies that might gain from a mort. buyback situation ( ABK,RDN,PMI,MBI) do you think their is no way it will happen??
Run26.2 has got it right but I think you also have to add in an improving macro picture that says holiday retail season will be decent-2.3% sales growth or so year over year. With that as background you’ve got investors looking for good retail plays and the COH earnings say, Pick me; pick me!
They reported earnings before the market open today: 07:09 AM Coach (COH): Q3 EPS of $0.63 beats by $0.08. Revenue of $912M (+19.7%) vs. $847M. Shares +0.5% premarket.
I don’t follow COH, but huge revenue and EPS beat probably reason for gain, would also look at what they forcast for next quarter. Maybe uped? Again, I don’t follow, so some research is required.
yeah Jim,
What is up with Coach?
kd
Jim,
What’s up with Coach (COA) up over 11% today?
sballa