MARK HULBERT Do you have the guts? Commentary: Being a contrarian takes guts, like buying Citigroup stock By Mark Hulbert, MarketWatch Last Update: 12:01 AM ET Nov 6, 2007Print E-mail Subscribe to RSS Disable Live Quotes ANNANDALE, Va. (MarketWatch) -- OK, all of you who claim to be contrarian investors: It's time to see if you walk the walk, not just talk the talk. How many of you have stepped up to the plate in recent trading sessions and bought shares of Citigroup? You say you don't follow the crowd. You say that your favorite quotation is Nathan Rothschild's famous phrase that the time to buy is when the blood is running in the streets. Well, now may be just such a time. That at least is what I conclude by reviewing the advice of several of the contrarian newsletters that I monitor. The blood of Citigroup, Inc. (C:Citigroup, Inc News, chart, profile, more Last: 35.90-1.83-4.85%
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Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: 35.90, -1.83, -4.8%) has definitely been running on Wall Street over the past few days. A brokerage downgrade of the company was blamed for the 362-point plunge in the Dow Jones Industrial Average ($INDU:Dow Jones Industrial Average News, chart, profile, more Last: 13,543.40-51.70-0.38%
4:03pm 11/05/2007
Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: 13,543.40, -51.70, -0.4%) last Thursday, for example. And the stock fell another 5% on Monday, following the resignation over the weekend of Citigroup CEO Chuck Prince and the company's announcement that it would take at least $8 billion in new mortgage debt-related write-downs. ( Read full story.) One newsletter editor who definitely is buying in the wake of Citigroup's blood running in the streets is John Dessauer, editor of the Investor's World newsletter. In his most recent hotline, written last Friday night, Dessauer had this to say about the company: "The fact is that Citigroup is one of the most profitable companies in the world, earning $21.2 billion last yea r... Earnings estimates for 2008 have been reduced but are still ... well above (what is) needed to restore capital ratios and eliminate speculation about a dividend cut ... Take advantage of the negative speculation. Citigroup is a Buy." Kelley Wright, editor of Investment Quality Trends, agrees. In his most recent issue, he draws an analogy between Citigroup's current travails and those that plagued Altria Group (formerly Philip Morris) earlier this decade. Wright reminds us that, in 2003, Altria Group Inc. (MO:altria group inc com News, chart, profile, more Last: 72.36+0.25+0.35%
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Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: 72.36, +0.25, +0.4%) "was deeply undervalued ... because of a $10 billion judgment against the company. The judgment, which could have effectively put the company into bankruptcy, was eventually overturned but not before the stock slid to $28 a share with a dividend yield of 10%! We initiated our largest position ever in Altria and today the stock trades in excess of $73 with a $3 dividend and a current yield of over 4.0%." Wright acknowledges that the crisis in which Citigroup currently finds itself might prove to be different than the one from which Altria was able to recover. After all, he points out, "the Wall of Worry is a constant Wall Street companion." But, like previous crises, Wright is betting that, "this too shall pass." These two editors turn out to be in good company in endorsing Citigroup's prospects. Among the investment newsletters monitored by the Hulbert Financial Digest that have beaten a buy-and-hold in the stock market over the last decade on a risk-adjusted basis, Citigroup is tied for 14th most popular. Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980. |