You probably won't believe what I'm talking about but I really believe there is some good value now in this company and it is the time to consider to get some shares of it. This is the company which used to be called Financial Supermarket since its products and services had and are still having covered almost all aspects in the financial world. It is kind of Walmart in Finance! However, this is probably one of the key factors which brought down the kingdom to the edge of collapse during the financial crisis in 2008. Needless to say, this bank as with almost all other banks got a near-death blow and its share price dived down from nearly $60 at its peak to below $2 when it bottomed in Feb 2009. However, it did survive with the help of the taxpayers' money from the US government as well as its significant restructure and reorganization in the past 2 years. Its share price has improved quite a lot from its nadir but is still struggling at the range of $4 to $5. You probably can guess by now which company I'm talking about. Yes, it is Citi Groups (C).
Don't get me wrong that I'm thinking Citi has fully recovered with no significant problems anymore. Far from it, especially it still has abundant garbage assets on its book and it is still too big in its scope. It would be much better for Citi to downsize itself by either splitting or selling non-key assets and functions so that it can more focus on its core business. Citi is apparently doing or considering to do that. The thing which attracts me most is that the book value of Citi is reported at about $5.5 per share; even better its tangible asset value is at about $4.5 per share. In other words, if Citi is totally liquidated today, Citi worths a cash value of about $4.5 per share even without taking into consideration intangible asset values such as goodwill etc. Therefore at its current share price, Citi is traded at a significant discount against its book value. Whenever a company is traded below its book value, the risk to me is quite limited. Is Citi still at risk of collapse? Absolutely but I think this is just a theoretical risk. Given its size and importance, you know what the US government will do if a huge crisis hits again. It is simply too big to fail according to the Obama and Bernanke's dictionary! Will Citi's share price drops again from the current level? Certainly possible! But I think such drops are likely limited and transient and if the US economy truly recovers, the financial institutions must lead first. I think Citi's share price is likely to increase 50% to 100% from this level in the next 1-2 years. Looks like the market is finally undergoing a correction, which may bring down stock prices for most of the companies. If you believe me about Citi, it is a good time to accumulate shares of Citi when it is still very cheap. Remember, the best time to buy stocks is when there is blood on the street with prevailing panic sentiments. Be Lonely is one of the keys to make money!
Personally I have used a combo of options (selling put and buying call) so that I don't pay anything upfront to hold a right to exercise for its unlimited upside and if the worst case comes with another crisis, I can buy Citi shares as low as $3 per share. Of course, this requires some quite sophisticated understanding of options. Actually simply buying Citi shares at this price is also a very good way to bet on its upside. I suggest to use a 25% stop loss to minimize the overall risk in case it is a wrong bet.
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