Stocks | Jul 8, 2010 | 0 Comments

Time to Load Up on Citigroup?

Investors Eye Big-Gain Potential . . .

Citigroup (Symbol: C) is one of the stocks I keep tabs on. Once a high-flying stock, it’s been reduced to the dollar bin. But there are some signs that it might be poised for future growth. And more importantly, will the Treasury Department complete its selling activities in 2010?

On Tuesday (July 6, 2010), CNBC’s Stock Brawl featured Citigroup. Representing the bull side was Dick Bove from Rochdale Securities, who is championing ownership of Citigroup stock. On the bear side was Harry Rady, a portfolio manager for Rady Asset Management—worth noting that Rady has no ownership in Citigroup.

Rady’s main arguments were that Citigroup isn’t best of breed and they were too large. He did say that if Citigroup hits $5, he might short it.

On the bull side, Bove mentioned that the selling off of the government’s position could be complete in a couple months and a move to $5 should be fairly quick. His outlook of $8.50 per share is 3 years out.

He also noted that Citigroup is currently shedding dead weight and cutting debt.

Is Citigroup too large to manage? It currently serves over 200 million customers in 140 countries.

The Chart

Here’s the two-year chart on Citigroup. As you can see, it’s basically flatlined in the $3 – $5 range. On a short-term basis, a move from $4 to just $5 would be a 25% gain. Might we see this move by September or October?

Sentiment

Here’s an interesting note. CNBC did a poll asking viewers if they were bullish or bearish about Citigroup.

Of the 1,027 responses, a dominate 91% were bullish on the stock.

This brings up the next question. Is selling by the Treasury Department keeping the stock price artificially lower? If so, what happens when the selling is over?

On July 1, 2010, the Treasury Department announced that it had completed phase two of its stock selloff—1.1 billion shares at an average price of $4.03.

It’s worth noting that the Treasury Department still owns 5.1 billion shares and stated that it’s committed to selling its stake in Citigroup “in an orderly fashion” once the blackout period set by Citigroup ends. Previously, the Treasury  said they planned to sell their entire stake over the course of 2010, subject to market conditions.