Trade: Citigroup (C)
In preparation of the second portion of the CCAR results that will be announced tomorrow, I refilled my position in Citigroup today, purchasing shares at $66. Unfortunately, I didn't get shares purchased yesterday when the stock was in the $64s and then I pulled the trigger a little too early today, as the market started making a massive swing to the down side around the time of my purchase. My reasoning for purchasing the stock was that it was near the price target area I've been hoping for since I sold up in the $72 range and we now have a catalyst which I believe will charge all bank stocks in the second half of the year.
The CCAR results have been an inflection point for bank stocks, historically, as they are then allowed to start to distribute their excess capital as per agreement with the Fed. I believe that Citi's captial distribution plan will be well received by the Fed, enabling them to distribute approximately $20B in dividends and stock buybacks over the year. Last year the dividend was increased to $0.32 and this year it is likely to grow significantly larger to enable them to share the excess capitalization they've accumlated to ensure they are viable in worst-case stress scenarios that the Fed analyzed them on. With the stock price near tangible book value, I expect the company will be quickly jumping in to buy up stock at these low prices, driving the price higher again. My expectations is that Citigroup will have one of the best, if not the best results in capital redistribution of all the money center banks.
While the stock's charts aren't looking the best, I believe this catalyst will change the tide of how the banks have been performing as of late. I maintain my ranking of a 1 for the stock when prices are at these levels and reiterate my price target of $77.
Notes:
Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.
The CCAR results have been an inflection point for bank stocks, historically, as they are then allowed to start to distribute their excess capital as per agreement with the Fed. I believe that Citi's captial distribution plan will be well received by the Fed, enabling them to distribute approximately $20B in dividends and stock buybacks over the year. Last year the dividend was increased to $0.32 and this year it is likely to grow significantly larger to enable them to share the excess capitalization they've accumlated to ensure they are viable in worst-case stress scenarios that the Fed analyzed them on. With the stock price near tangible book value, I expect the company will be quickly jumping in to buy up stock at these low prices, driving the price higher again. My expectations is that Citigroup will have one of the best, if not the best results in capital redistribution of all the money center banks.
While the stock's charts aren't looking the best, I believe this catalyst will change the tide of how the banks have been performing as of late. I maintain my ranking of a 1 for the stock when prices are at these levels and reiterate my price target of $77.
Notes:
Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.
Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.
Comments
Post a Comment