Citigroup

“Citigroup is organized into four major business groups: Global Consumer; Markets and Banking (M&B); GlobalWealth Management; and Alternative Investments. The Citigroup Global Consumer business includes banking services, credit cards, loans and insurance. The M&B business is in about 100 countries and advises companies, governments, and institutional investors on the best way to realize their strategic objectives. The GlobalWealth Management division at Citigroup is comprised of The Citigroup Private Bank, Smith Barney (private wealth management), and Citigroup Investment Research,and serves both private and institutional clients.”

Here are my reasons for buying:
-As a general rule I’ve found that the best time to buy large multinational blue chips is when everyone else hates them.
-Currently 45% of their revenue is generated outside of the United States and their current focus is to increase this number to 60%.
-They have the world’s largest credit card operation.
-In my opinion they are extremely well positioned to expand their international operations.
-Management is aggressively working to rebuild their capital base.
-The potential exists to unlock some value if Citi is broken up into separate entities.
-I believe long term this franchise will be a survivor

PE – 34.3
Estimated 2007 PE – 8.9X
Estimated 2008 PE – 6.8X
Current dividend yield – 5.13%
Price/Book – 1.1X

Other Facts:
-S&P recently downgraded them from 5 stars (strong buy ) to 3 stars (hold). However, they have a 12 month $35 price target
-Argus recently reduced their 1 year target price to $35 from $55 but are maintaining a buy rating.

Calculated Fair Value:
I’ve calculated the fail value of C (based on current information) to be approximately $32.81. My estimate is a little more conservative than both S&P and Argus however, from it’s current price there is a 31% upside.

I initiated a half position in C last November and a bought another quarter position last week. I will continue to watch the developments on this name and am not opposed to initiating another quarter position in the future. What are your thoughts?

[I currently own shares of C. No information provided on this site should be interpreted as either advice or a recommendation. Please do your own research and consult your own financial advisor before buying or selling.]