Friday, December 18, 2009

Is Citi a buy?

From what I gathered ..
1) The share issue will mean index ETF need to buy C to reweight it correctly in the index - (So means selling will be supported hopefully)
2) The book value(if you trust the numbers) before the share issue was around $4+. So, after the X% dilution, you just deduct accordingly (assuming no change in book value). Probably around the share issue price of $3.+ after dilution.
3) John Paulson believes in Financials - Read why from http://thewealthjourney.blogspot.com/200...-citi.html (He might have bought early but like Buffet, he believes it will turn out alright 3-4yrs later).

So, I believe it's a knee jerk reaction and if you are a trader, you trade the news. If you are 3-5yrs investor, you accumulate when C shares start turning up (look at the chart after it bounced off its support line).

But most important of all, just keep your money management plan in place (appropriate position size and exit plan) and you should be alright.

5 comments:

dream said...

bro,

have you bought into Paulson's recovery fund? I have thought about it but decided to DIY. I buy and manage my own portfolio of US financial stocks.

dream

Wealth Journey said...

Can we buy into it? I thought his funds have been closed and open only to institutions?

I'm not sure.. but I have bought SHK Corp Arbitrage which is feeding into 2 of his funds.

You can find the performance and ratings of hedge funds here.
http://www.trustnetoffshore.com/Factsheets/Factsheet.aspx?fundCode=O8F22&univ=DC&pagetype=overview

dream said...

bro,

thanks for your info. :)

two ways you can buy into Paulson's recovery fund. if you walk into any of the private banks, the minimum invested is US$10M. obviously not many people can afford it. the other alternative is to look for Paulson's recovery feeder fund like the one offered by Merrill Lynch; the minimum is US$100k which is more affordable.

dream

sgfinancialfreedom said...

WJ,

You into Citi too?

I have a few shares in it. Was thinking whether I should add more since Citi still seems pretty depressed for its price

Wealth Journey said...

FF,

To Buy or Not to Buy? It depends on your appetite and position size.

I am a believer of diversification and money management(position size & trailing cut loss) as I have no illusion that I have an edge over the market. Thus, I make conviction buy of max 5% and not more.

Currently, most of my conviction buys are around 3-5%, while Citi is a speculative play around 1% of my equity portfolio.

My thesis for Citi is simple :- As far as I see, Citigroup global franchise is intact and it is selling under book value even after dilution. So, I'm confident the Citi brand will continue to gather more assets under management from it's global franchise resulting in increase in book value sooner or later.