Saturday, November 19, 2011

Shhhhh! The fundamentals tell me that you should very quietly start buying the stock of Citigroup Inc."

Dow Jones Industrial Average 11,796  (Down) Week Ending 11/18/2011

Sometimes you are down so far that the only place to look is up. (picture left). There will continue to be rumblings and tumblings with the European countries and banking systems with the travails of the Euro. But one of these days, while the dust is settling, there will be a flight to safety to the recapitalized banks of the United States of America. And on that day, a company with one of the ugliest 5 year stock charts I have ever seen is going to start it's long ascent back up to prominence in the Dow.

5 Year chart of Citigroup (symbol C, NYSE)

 Citigroup Inc. (Symbol C, $26.28) has the fundamentals lining up to become a good one to three year investment. I know, you are thinking to yourself, what about the large overhang of the housing and mortgage market. The market will slowly digest it and the housing market will very slowly start to stabilize and turn around in the other direction. Inventories will eventually come down.

Citigroup has projected 2011 earnings per share of $4.08 and projected 2012 earnings per share of $4.45. 3rd quarter GAP earnings were up 75.71% this year's quarter over last year's quarter. Total Net Income continues to rise each quarter over the next. They are getting their fiscal house in order and it will be corrected over time.  Sales growth will be a rough road to hoe for a while with a company that has such large revenues to begin with.

Yes , you could play it safe in the treacherous waters of this market and buy a JP Morgan or Wells Fargo like some well noted investors have, and they are very good businesses, but their stocks are not trading at 49% off of their 52 week high price like Citi is here. This is a longer term trade that you will buy and put away awhile and check the price in about 6 months. The return will come over time, a rare thought in these markets.

Here is a New York Times link on the stock:

You may even save a few bucks if you buy it next week with Congress's "Super" Committee in deadlock and another possible US credit downgrade coming. Time for the US Govt. to finally get their financial house in order. 


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