Citigroup common (C)
A repost from pecuniary.wordpress.com:
I’m coattailing Bill Ackman on this one, even though I think the holding period will probably end up testing my patience. Citigroup is trading at less than tangible book value, which is growing rapidly from new business written at huge spreads. The next $21 billion of income will be free of taxes. Citi has virtually no exposure to option-ARMs, which are causing large losses for banks such as Wells Fargo. For Ackman’s complete thesis, see Pershing Square’s most recent investor letter.
I think C shares have a 1% probability of going to zero and a 99% probability of being worth at least tangible book value ($4.20). Because the Treasury intends to sell its entire stake at below intrinsic value, long term investors will earn easy money here.
This is categorized as a generally undervalued opportunity because I think the shares will be more correlated with market fluctuations than available workouts.
