American International Group Inc (AIG), Citigroup Inc (C): For Financials, the Five Year Chart Is Becoming Misleading

Now, financials are often cited as value stocks based on historical share prices and low price to book ratios. Many of the conservative investors remain on the sidelines as uncertainty is still a thorn in the side of this industry and income investors are not willing to return to collect the measly penny per quarter.

But by the end of this year, the fairly ubiquitous five year chart will only display post-crash share prices. With the crash wiped off the chart, a small percentage of conservative investors may begin to return as the chart appears more stable (even though the change in the chart in no way strengthens the companies). By this time, these companies may have raised their dividends to respectable levels once again (a factor independent of the charts) attracting some income investors back as well.

Forgetting the fallout

Today, a look at the five year charts of any of these companies serves as a cautionary reminder of the financial disaster these companies helped to bring on the economy. But already some of the effect is being erased with the greatest high marks from before the crisis disappearing off the left of the chart. In some ways, it is a sign that we are recovering from the worst of the market but it could cause some investors to begin unconsciously forgetting about the collapse. Followers of Bank of America Corp (NYSE:BAC), Citigroup Inc (NYSE:C), and American International Group Inc (NYSE:AIG) need not be reminded of the share price collapse, slashing of the dividend, and massive share dilution. For those not involved in the world of financial stocks, it is best to look beyond the five year mark to gain a better understanding of why these companies are where they are now. Personally, I am bullish on the recovery prospects for the financial companies mentioned here by maintaining them as value stocks, not conservative or income investments, at least while the dividends remain low. As always, a little look beyond the norm is good to help you fulfill a top rule of investing:Know what you own.

Alexander MacLennan has no position in any stocks mentioned. The Motley Fool recommends American International Group Inc (NYSE:AIG). The Motley Fool owns shares of American International Group, Bank of America Corp (NYSE:BAC), and Citigroup Inc and has the following options: Long Jan 2014 $25 Calls on American International Group