Citi: It Seems Like Everyone Is Flooding Into C

If you haven't created a position in C yet, this could be a good entry point. At least that is what prominent money managers are saying. Citi has had a wild ride in the past month. Seeing highs north of $5/share, down to lows close to $3.50 this past week. With over a 20% drop what are the main catalysts for getting in?

The US Treasury has stated that they had sold 1.5 billion shares for an average price of $4.13. They have also authorized another 1.5 billion share release of the total 7.7 billion shares they have acquired through the preferred exchange.

Fast Money pointed out that there are many whales stepping back in at this point buying up C, these Hedge Funds include:

Whales Bullish on Citi
Current Holdings:
Pershing Square: 150Mln
Paulson & Co.: 506Mln
Fairholme Funds: 227Mln
David Tepper: "Significant Position"
Source: CNBC.com

According to a Barrons article, Goldman Sachs has upgraded C to buy from neutral due to improved consumer credit and capital markets.

WHETHER YOU CALL IT URBAN RENEWAL or something else, what's clear is that investors are moving back into Citigroup (ticker: C).

Before Monday's opening bell, Goldman Sachs (GS) upgraded the financial giant to Buy from Neutral while downgrading Citi rivals Wells Fargo (WFC) and Comerica (CMA) to Neutral from Buy.

Analyst Richard Ramsden wrote that "the turn in consumer credit, and prospects for a good capital markets quarter," inspire confidence in Citi's ability to outperform. He also has a Buy rating on JPMorgan (JPM) and Bank of America (BAC).

Since we have not reached a level of normalized earnings after the '08 credit crisis, it is very difficult to value banks on P/E multiples. One way to do bank comparisons and fundamental valuation now, is through analyzing Book Value Per Share as The Street Insider has done for us.

A key metric to value Citigroup and other bank stocks is Tangible Book Value Per Share. At the end of Q1 Citigroup's Tangible Book Value per shares was $4.09. Banks stocks usually trade for at least 1x tangible book and some much higher. The average amongst Citigroup's stronger peers is about 1.7x.

There is one theory that Bill Ackman may be a buyer of Citigroup stock below Tangible Book Value, while the Treasury is a seller above Tangible Book Value.

Shares of Citigroup are siting at $4.02 currently, up 3.9% today. Based on the theory above, shares could easily glide to $4.09, but once there there could be major resistance as the Treasury unloads and hits any bid.

The good news is that once the government gets out of the way, shares could trade at a market multiple of 1.7x tangible book value. That would get the shares about $7.

For additional opinion, here is Jim Cramer's take on C.




Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas. Disclosures: Long BAC Long C Long F Long GLW Long SPF