Citigroup (C)

Citigroup closed today at $3.86

From a valuation standpoint, three criteria stand out for me:

• Price to book- .76
• Book Value/Share- $5.46 vs the current price of $3.86
• Citigroup’s recent profitability and repayment of TARP funds

Although the P/E ratio is very high (41.12) and well above the current financial industry average of about 21(for firms with market caps above 20B), it is still a justifiable purchase on the basis that earnings HAVE grown and on the prospectus that EPS will continue to grow.

Even if over the next year, which is a somewhat pessimistic outlook, Citigroup trades at a minimum of their BV/Share, you would realize a return of $5.46-$3.86/$3.86=41%. If you run a screen and try to find companies trading below BV/Share you will be hard pressed to find any well known mid-large cap firms...and even if you do, the prices don't say depressed for long. Interestingly enough, I read the S&P's report on Citigroup and their year end price target is $6.00...hmm suspiciously close!

The biggest concern about Citigroup was whether the company could avoid bankruptcy after the multi-billion dollar losses over the past quarters. However, these concerns should have been mitigated after Citigroup posted a net income of over $4B last quarter. In addition, the company is also signaling strength by repaying TARP funds.

If Benjamin Graham made his money from buying “cigarette butt stocks”…we should consider Citigroup to be Treasurers...almost $20 a pack!