Citigroup (NYSE:C) shares continue to be volatile. Shares of Citigroup, which were trading at more than $55 per share in 2007 plummeted to less than $2 in 2009 and have begun to recover reaching more than 5 dollars in April. Citigroup shares closed below 4 dollars in trading yesterday at $3.86 per share. 
This is not an unexpected situation for informed investors; as the government owns more than one quarter of Citigroup, and has been unloading roughly 20% of their stake of approximately 7.7 billion shares in the company since late April. The Treasury began selling its common shares under a prearranged plan with Morgan Stanley as the sales agent for the deal. The initial sell off of shares amounts to roughly 1.5 billion shares. Citigroup stock should basically trade sideways to slightly lower while unwinding of this first lot is completed. Once complete, the stock should move up as the company continues to unwind or sell off many of its toxic assets; on the path back to its core banking business as the fundamentals continue to improve. It is important to remember that at some point the Fed will have to raise interest rates and banks like Citigroup will once again have to actually work at turning a profit, but over the long haul, this stock should bring solid gains to its holders.
As Citigroup continues to improve both its tarnished reputation and its core business, it has taken some significant steps to reduce its exposure to bad debts. Among the many moves Citigroup has implemented was suspending foreclosures on homes and instituting foreclosure alternative programs, which have allowed homeowners that are facing foreclosure to stay in their homes for six months or more provided the homeowners are willing to sign over the deeds to the property to Citigroup once time has expired and no viable alternative has been found. Citigroup has also been actively and aggressively promoting and using the US Government’s new Home Affordability Modification Program (HAMP) and plans to offer other methods of assistance such as refinancing options, loan modifications and principal reductions. Citigroup sees these methods as in their best interests as well as their customers. These alternatives have helped many homeowners by giving them additional time to make alternate living arrangements when there is no other option but loss their home due to personal or economic circumstances. While Citigroup does not pretend the modification program is perfect, and many homeowners are still very upset with every bank and mortgage lender, Citigroup has been able to modify home loans for half of their homeowners in the Home Affordable Modification Program and it is a win win situation for both the homeowners and the company.
Also interesting and of note, as of March 31, 2010, Soros Fund Management LLC which reported owning 94.7 million shares of Citigroup worth $313 million in December, listed ownership of just 10,500 shares of Citigroup at the end of Q1. Soros Fund Management may have made a quick double if they bought the shares last year for around $2 and sold at over 4 in the first quarter.
Based on solid results and continued improvements to their corporate structure and financial resources, accumulation of Citigroup stock, especially adding on perceived weak trends over the course of the year seems like a solid move. Even with the volatility, Citigroup should turn out to be a very profitable and solid holding if accumulated properly. With a huge 29 billion shares out, at some point a share buyback or reverse split plan would seem to be on the table in the future.
Disclosure: Currently no position in C
While I appreciate the information and opinion shown in this piece, I would caution would be investors to not be influenced by the ‘Was $50, Now $4′ share price talk above. Think of it this way… if the stock has 1 share worth $50 and now has 4 shares worth $4 what is the real drop in value? $50-16 = a lot more then the infered $50-$4. Anyway, just a word of caution, look at the market capitalization then and now, as a TON of debt has been switched over to shares in this company.
Good way of looking at it Kent but Citi had market capitalization of approx. $275B at the end of 2006 (which was obviously overvalued). Now C is at $106B with more shares outstanding. Other big banks (BAC, WFC, JPM, etc.) are sitting at around $150B market cap. If they can keep posting $4B quarterly profits Citi looks like a hell of deal to me.