I just scooped up some Citigroup shares. I’ll be honest: I didn’t dig ultra deep into any filings yet, as I figured the thesis may no longer be applicable by the time I finished reading the massive tome that is a Citigroup annual report. My reasoning was simple — the sprawling firm has some premier properties, trades at what I consider unjustifiably low valuations, sports a strong dividend yield to provide downside risk protection, and has garnered the sponsorship of a few well-respected value guys, namely someone I consider a Graham and Doddsville superinvestor, Eddie Lampert.
Given that I don’t have many extraordinarily knockout ideas right and had some cash that could have been put to work, I felt this was a safe place to park some dough with the added benefit that a catalyst (breakup, anyone?) could send the shares significantly higher. My back of the envelope calculations put a break-up value at somewhere between current prices and a whole lot more. This highly scientific reasoning is coupled with the fact that Citigroup sports solid returns on equity, respectable — albeit modest — growth for a behemoth its size.
Bottom line: potential for outsized upside, downside protection with dividend yield around 80% of Treasury yields, and lots of smart money showing interest in catalyzing an opportunity.