Any saavy investor will tell you it's always smart to diversify your portfolio. For me that doesn't just mean teaching a variety of industries, but rather having multiple strategies as well.
One of these strategies is buying into an otherwise solid, well established company who's been kicked in the teeth and is down in the dumps. In the vast majority of cases there are one of two outcoms. Think about GM and Ford. GM went bankrupt and old GM stocks went down to zero. Ford, on the otherhand, is well poised to come out clean on the other end and their stock is way up from its lows. And it will likely keep climbing.
We can talk about "toxic assets", unimployment, economic indicators, mergers and aquisitions, etc. until the cows come home. But looking at this from a longterm perspective there is only one, simple question. Will Citigroup go bankrupt like GM or will they come out the other side like Ford?
I think even the most pessimistic of analysts would agree Citibank is NOT going bankrupt. Some might disagree about (when) they come out the other side, but the IF isn't even a question.
Might you lose money in the short term? Of course. Even with the most financially solid blue chip stocks they're likely to go below your buy price more than once before they climb up and over. I bought Apple at 135 a share and I was down at least thrice (that I can recall), and now it's up over 160. And this was about a month ago.
Even with the knowledge that C is a longterm investment it still takes a certain amount of discipline to hang on through down days. That's why it's important to be well diversified. It helps you handle the up and down swings.
I have to admit it was tempting for me to sell at $3.35 hoping to buy back on a dip. But then, why rack up the brokerage fees trying to time the market? I'm not looking to make 10-15% and then sell. I'm looking to sell once Citigroup is once again off and running as a profitable company.
Excellent post!! I could agree more with your philosophy about investing in C like stock.
Honestly, I feel the current environment in the stock market is similar to 87, 92, 97, 03. We are going to be in for a bumpy ride but we will be going up hill from here.
As for the banking stocks, the current levels are once a decade opportunities...4 months ago they were the opportunities of the century. We just need to have faith in our system...
I will continue to accumulate banks for the next 12-24 months as long as they don't run up 100% from here. If you invest $2000/month evenly between C, WFC, JPM, BAC, and GS five years from now you will not be disappointed in the returns. These banks will all survive and prosper again.
As for C, I think the market is grossly underestimating the value of all the assets the company currently owns and the value of the stock. I don't think they will return to its glory years but it could very easily trade 4+ in the near term and to $7+ by the end of this year. Long term I see the company dismantling its assets, paying back tarp, buying back stock and providing handsome return for those considered crazy for owning today.
I'm not going to bet the farm on C stock but it is a good secondary holding to have with big upside potential.
<"Any saavy investor will tell you it's always smart to diversify your portfolio.">
NOT TRUE. Buffett once(?) remarked that this canon
always perplexes him, for the only thing that makes a sense to him is investing in a solid co. with great future.
I for one is currently only with C and with a large position.
I agree, I bought BAC in the mid $3, bought and sold many times. Last time I sold was $12.37, then it took off, I gave up chasing it. Looking back on it I would have made much more by just holding. I hope to have that chance with C, looking for a double before end of the year. GL
Negativity in this stock isn't a result of poor future prospects for the company. Rather, investors are fearful that the company's management will introduce dilution and a reverse split which can be a sever detriment to current common shareholders. If this turns out to be true, then now-- in future retrospect-- will have seemed like an inopportune time to purchase common shares.