Thursday, April 2, 2009

WSJ: Individual Investors Pile into Citigroup (C)

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At first I sort of snickered when I read this story - "gosh, they will learn someday" I thought to myself. Then I realized with our tax dollars hard at work supporting their bid, they will probably make more money than any sort of rationale balanced fundamental based portfolio would. The fact Citigroup (C) stock is even in existence is a sad fact, but for that matter I guess it is superior to AIG (AIG) Fannie Mae (FNM) and Freddie Mac (FRE) which all still trade... why not.

I would normally end this with an admonishment that if you lose a ton of money (30,40,50%) you need to take some extremely risky bets to make it back in relatively quick fashion... but most likely I'll look back at this post with Citigroup (government backed and approved) surging in double digits in a few quarters, so I'll resist that Polaroid moment.


Per the Wall Street Journal
  • The old Wall Street adage about the dangers of catching a falling knife doesn't seem to be scaring individual investors away from Citigroup Inc. Some discount-brokerage firms report a surge of individual, or retail, investors buying shares of Citigroup during the past five months, amid the New York bank's stock-price slide. For some investors, the chance to buy a Dow Jones Industrial Average stock at a low price, and the hope for a quick buck on a rebound, have proved too tempting to refuse.
  • "We're speculators, and that can be really risky, but it's worth it to take a shot," said Jin Chen, a 22-year-old Rowland Heights, Calif., resident who recently bought 10,000 shares of Citigroup at $3.10 a share. "This is my opportunity to make some money."
  • Citigroup shares have consistently been among the most actively traded stocks during the past several months at online brokers TD Ameritrade Holding Corp., E*Trade Financial Corp. and TradeKing.
  • At TradeKing, an online-brokerage firm based in Boca Raton, Fla., about 9.3 million shares of Citigroup traded in March, compared with 3.4 million in February.
  • "Most brokerage customers are looking at a portfolio down 50% from a year ago, and thinking that they have to get even," said Don Montanaro, TradeKing's chairman and chief executive. "The self-directed are becoming more active, and that's the kind of behavior we're seeing with Citigroup."
  • Despite Citigroup's recent losses and worries about the impact of the recession, analysts' average price target for the stock is $3.53, according to nine analysts tracked by Thomson Reuters. That is 32% higher than the price Wednesday. David Trone, an analyst with Fox-Pitt Kelton, said in a recent report that he expects Citigroup shares "to gravitate back up toward the $3 mark once the emotion of the moment passes." (now if this WSJ writer was doing a service to readers he would point out what price target these same group of analysts had a year ago for Citigroup)
  • Part of Citigroup's appeal for speculative individual investors is sharp percentage swings in the stock. Not since the dot-com boom and crash have stock prices moved as erratically as during the past year, and Citigroup is an extreme case.
  • Several investors who recently bought shares of Citigroup said they are betting that the government won't allow the bank to fail. (once again, everything you learned for 5, 10, 15 years in the market means very little in this new day and age of government sponsored casino chip betting) Retail investors were intrigued when Chairman and CEO Vikram Pandit said there is no current need for more capital after the conversion of a large chunk of preferred stock into common shares. Meanwhile, he said in early March that the bank is off to a profitable start this year.
  • Casey Russell, a 32-year-old salesman from Little Elm, Texas, started buying and selling Citigroup shares in October, when they slumped to what he thought was a bottom at $20. (missed it by *that* much) Right now, Mr. Russell has about 3,000 shares that he plans to unload if the stock recovers. He says he has 10% to 15% of his portfolio at risk in Citigroup shares. "There's been a wildfire of fear about Citigroup," he said. "I'm like a lot of people who now get to own an icon, not just a brand. And I just feel like it can't get much worse for the company." (icon? eesh)
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