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JimVanMeerten (61.08)

C: The penny stock I love to hate

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August 23, 2010 – Comments (1) | RELATED TICKERS: C

Before you all jump all over me every time I call Citi (C) a penny stock, officially that's what it is. The SEC's official definition of a penny stock is any stock trading below five dollars a share and the Big C certainly qualifies as a penny stock under that definition.

Normally I don't fault others for recommending a penny stock but in the case of Citi I'll make an exception. I think there is a real lemming mentality when it comes to Citi. On Motley Fool the CAPS members think the stock will outperform the market by a vote of 8868 to 1696 with the All Stars in step with a vote of 1583 to 345. There are 11 Wall Street brokerages that have Citi on their published buy list even though they predict that revenue will continue to shrink by another 1.70% this year.

Why on earth would all these firms stick out their neck for this firm? Could it be that they hope Citi might have some big underwriting deals coming their way and they don't want to anger the sleeping giant?

Are they all expecting a dead cat bounce from this dog? The cat was thrown out the window in September of 2007 at about 45.72 took till March of 2008 to fully hit the pavement of .97 and just been rolling along since. We've waited too long for the bounce.

Do I think Citi will ever recover? Maybe, but there are 12,000 other stocks out there for you to choose from and people are still listening to those smarty pants on Wall Street who told you to buy it at $51 and never predicted the market free fall. Why are you still listening to them? With all these stocks to choose from they can't come up with a better recommendation than Citi?

How about some stocks that are increasing sales, earnings and cash flows. Those are the stock worthy of a buy recommendation.

Does Citi have some patent no other bank has? Are they in some territory no one else can enter? Can Citi do anything better that their 10 next largest competitors can't do just as well. Is it impossible for them to lose market share to any of the other banks?

Is Citi too big to fail or too big to succeed?

I'd like to compare the 5 year performance of my own portfolio on Barchart Portfolio Blogs - the Barchart Van Meerten New High portfolio ( I simply add stocks hitting new highs and cut stocks that start to fall), the S&P 500, the Value Line Index of 1700 stocks and Citi.

Barchart Van Meerten New High portfolio
 - 1 year 29.50% gain

 -  3 year 47.84% gain

 -  5 year 85.82% gain

S&P 500

 - 1 year 8.55% gain

 -  3 year 20.73% loss

 -  5 year 2.88% loss

Value Line Index

 - 1 year 25.3% gain

 -  3 year 3.40% gain

 -  5 year 26.3% gain

Citi

 - 1 year 29.34% gain

 -  3 year 90.5% loss

 -  5 year 89.0% loss

Is there anything in Citi's performance even just against the indexes that impresses you enough to put your money down on this long shot dark horse?

Right now here are the technicals on Citi from Barchart:

1 - 40% Barchart short term sell

2 -  64% Barchart overall sell

3 -  Only 1 buy signal out of the 13 Barchart technical indicators

4 -  Trading below its 20, 50 and 100 day moving average

5 -  Relative Strength Index of 38.67% and falling

I feel very, very sorry for the lemmings who were butchered by Wall Street in 2007-2008 but I can't feel sorry for those who still blindly follow their recommendations.

Do yourself a favor. Stand up and think for your self.

Jim Van Meerten is an investor who writes on investing here and on Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.

Disclosure: No positions in the stock mentioned at the time of publication

1 Comments – Post Your Own

#1) On August 23, 2010 at 2:10 PM, rd80 (98.23) wrote:

Nothing in the charts, but 10x this year's earnings, 8x next year's, less than tangible book, and a couple quarters of profits add up to keeping my CAPS green thumb on it.

No question it's speculative.  I had been as negative on Citi as anyone, but it appears to be turning the corner.

Disclosure:  No position in Citi. 

 

 

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