Is Citigroup Inc. (C) Still On The Way Up?

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Citigroup Inc. (NYSE:C) closed above $39 per share on December 17th, the first time it had done so since July 2011. The stock is up 51% in the last year, and over 30% year to date. There’s a case to be made that it’s still undervalued: the P/B ratio is 0.6, showing that the stock is trading at a large discount to the book value of Citi’s equity. Of course, Citigroup Inc. is not known as a particularly safe or reliable bank for investors, but even a moderate discount to book value would still leave it with a substantial upside. Wall Street analyst estimates imply a forward P/E multiple of 8 and a five-year PEG ratio of 0.8; again, we wouldn’t take that at face value, but it leaves significant room for the bank to underperform and still be a good value at current prices. In addition, three different insiders bought shares of Citi in November (see a history of insider buying at Citigroup); consensus insider buying, on average, is a bullish sign for a stock (read more about studies on consensus insider purchases).

The bank’s business has not been doing well recently, however. Revenues were down sharply in the third quarter of the year from their levels in Q3 2011, led by a decline in non-interest revenue; however, net interest revenue was also down slightly. With operating expenses showing little change, Citigroup reported about $470 million in net income as opposed to $3.8 billion a year earlier.

David Tepper

Citigroup Inc. had made our list of the most popular stocks among hedge funds for the third quarter of 2012 (see the full rankings), with 93 funds and other notable investors in our database of 13F filings reporting a position. It was also the second most popular financial stock, finishing behind only hot value play AIG. Billionaire David Tepper’s Appaloosa Management increased its holdings by 10% to a total of just over 10 million shares, making Citi one of its top five 13F holdings (find more of Tepper’s favorite stocks). Moore Global, managed by fellow billionaire Louis Bacon, initiated a position of 5.3 million shares during the third quarter (check out Bacon’s stock picks).

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