Sunday, February 16, 2014

"How about a bank that derives 56% of its global consumer banking revenue from credit cards. Such is the unrecognized case with the stock Citigroup, (Symbol C)."

Dow Jones Industrial Average 15,739 (UP) Week ending 02-07-2014
Dow Jones Industrial Average  16,154 (UP) Week ending 02-14-2014

Well the siege of winter has laid in upon us the last two weeks in the Mid-Atlantic states and Maryland, with snow, ice, wind and non-stop storms. It is hard to write a stock blog when you have no heat or electricity for 5 days straight. If I had known, I would have bought the stock of  Generac Holdings, (Symbol GNRC), who makes portable and installed electric generators and whose stock went up 9 points in 3 days last week. Oh well, not that clever.

 "My back porch"

So now it is time to get back to the business of making money in the stock market. If you will remember your economic history, the stock of Citigroup, (Symbol C, $49.52), had done a 10 for 1 reverse stock split. That really says that you can buy the stock here at a previous pre-split price of $4.95 cents per share. It is listed in the Investors Business Daily as a "Bank", but it really is a "Financial" stock based on its revenue like American Express and Discover. IBD rates the stock an 87 for earnings.

Citi has a market capitalization of $150 Billion dollars but the Enterprise value of the company is $239.90 Billion dollars. I took a small position in Citi last month than added another position Friday morning. Friday afternoon at 5:10 PM it was announced that George Soros had taken a position in the stock, so I knew that I was on the right track.

Citigroup has a Peg Ratio of 0.1389 and a Return on Equity of 7.23%. To me this stock is a deep value play that should hopefully start paying a higher dividend soon. "Despite huge losses during the global financial crisis, Citigroup built up an enormous cash reserve in the wake of the financial crisis with $420 billion in surplus liquid cash and government securities as of June 2012. As of Q1 2012, Citi has tier 1 capital ratio of 12.4%, making one of the best-capitalized financial institutions in the world after billions of dollars in losses from the financial crisis" (Citing Wikipedia). 

I do not pretend to understand a banks balance sheet or accounting, but I know when something seems inexpensive. Citi is forecasting earnings
of $5.04 per share and for 2015 is looking at $5.80 per share with a forward PE of 8.6.

The company stock has a One year twelve month trailing gain of 12.96. That might be glacially slow compared to the stocks that I normally talk about in this venue but most conservative folks would be very happy with 13%  a year return on their money. 

There are 21 buy recommendations by analyst on the stock currently , (plus add in the endorsement of billionaire George Soros).  Also insider buying is running 5 to 1 of purchases over sales. That is a very strong endorsement for the stock.

So think credit card, when you think Citi and buy some "C". 

Let's have a great 2014,


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