Regular readers will know we've been a fan of the U.S. Mega-banks for some time. Citigroup (C) is no exception, we've owned it since 2010. It's possibly the most hated bank in America now - right up our alley. Although C is out of favour with the street - there is still value - here at $49. The company has recently settled a court case with the Department of Justice (DOJ) - related to the bundling and selling of mortgages that went sour during the financial crisis. Many expected the settlement to reach $10 billion - Citi settled for $7 Billion. Citi also is recovering from a fraud case at a Mexican subsidiary - Banamex. Finally, Citi this past spring, failed a review conducted by the government on Citi's books. We didn't expect them to fail the review - nor did the street. I'd expected Citi will be extra cautious on the next review. Passing the government's review will allow C to raise the dividend and buy back stock. Both will be welcome by the markets. Citi still trades at a meaningful discount to it's tangible book value and at less than 10X next year's earnings - Citi is cheap. We're not adding, but will continue to hold for full value.
While the markets have steamed ahead the past few years, we are still able to find pockets of value.
We look in areas that are out-of-favour, un-loved and under stress. Our search reminds me of one of my favorite quotes from the famous investor John Templeton - "stocks are rarely popular and cheap at the same time".
Our search has led to an industry that boomed from 2002-2007, and is now un-popular and cheap.
Many companies in this industry are well capitalized, operate globally and pay healthy dividends.
Subscribers to the
www.roi-report.com know that we have started a position in a mega-sized company in this industry.
If you are interested, you can check out
www.roi-report.com
Enjoy the rest of your summer!
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