Citigroup Inc. (C)

Really likes this company because it has a really high Book Value and has lots and lots of upside potential. Everything seems to be going for it, and the market doesn’t care. At some point, he expects that the US banks are going to respond to the value, so it is not the type of thing you need to rush out and Sell.

On banks that will do well even if rates don’t rise, this one really fits the bill. Doing a great job of turning around the assets. They are trying to accrete more value to tangible Book Value, and that will really re-rate the multiple. Dividend yield of 0.39%.

(A Top Pick Dec 3/14. Down 2.72%.) The Fed may hike rates next week. Financials do well in a rising rate environment. His model prices $59.52, a 10% upside. Still a buy.

Fairly undervalued. Trades at about 90% of tangible book value. The average US bank trades at 163%. This indicates there is still a cloud over this bank. Trading at about 10X earnings compared to the average US bank at 13X. Loan growth at 2% is decent, but not great. Higher interest rates are going to be the real catalyst for all the banks.

(A Top Pick Nov 3/14. Up 0.98%.) Along with everybody else, he is waiting for the catalyst, which will come from a steeper yield curve, which will be led by the Fed raising rates. Really a valuation story. They are trading at about 90% of tangible book, while the average bank is about 160%.

Money center banks will move with the economy. The yield curve should steepen and that will benefit banks. About 10 times earnings vs. 13 for the average bank.

53% of their revenue comes from outside the US from many countries. It is a retail focused company with a cheap valuation. It has gone through the stress test okay. There has been a lot of pressure on these names but the litigation has been settled. Get it for under $50.

This is tough for him. It is just on the line and goes back and forth on this line. When they thought the interest rates would go up, it was a negative for the stock. The market just can’t make up its mind on this group. There is easier money that can be made in the market.

Sell Citigroup (C-N) and buy Wells Fargo (WFC-N)? If you understand the differences between the 2 banks and make considered decisions, then you could. He owns both. This one is a valuation play trading at about 70% of tangible Book and the average is at around 160%. Trades at about 10X earnings, while the average bank is around 13X. It just depends on what you are looking for in a bank. They are going to move roughly together, but with a positive economic background, this one might recover more quickly because of the valuation spread.

Chart shows a little upward trend. $52’s a pretty decent support level. A lot of stuff is just starting to roll over though. If it holds $52, this is probably a pretty good deal.

US banks are in a tough position overall. Thinks litigation is going to continue. All the banks are under a bit of a watch in having to go to the Fed with their friends in the Fed’s telling them what they are allowed to do.

(A Top Pick April 29/14. Up 17.45%.) American banks are moving out of the period of time where they were getting lawsuited to death. The mortgage market is normalizing in the US. Still very cheap. (See Top Picks.)

(A Top Pick Aug 18/14. Up 10.35%.) There is a stealth rally going on in US financials in the big money centred banks. This one is finally breaking out. Had its capital plan approved by the Fed in March. This is a capitals return story. Very cheap on a multiple basis, a de-risked company, has most of the overhang on litigation behind it, and is now positioned to start returning capital. Thinks this could easily be a $75-$80 stock.

Visa (V-N) or CitiGroup (C-N)? From his perspective, he would say this one because it is probably a better investment at this point in time because a) it is much cheaper from a multiple perspective and b) Visa has a much higher multiple.

This is a great buy here. Thinks there has been a change in the direction of long-term interest rates. With that comes a tailwind for financial services, especially the big banks. This is inexpensive and is trading below BV. They are likely to start making money on their net interest margins. Technically the stock broke out just 2 weeks ago to make a new high at $57. Expects very good dividend growth as we go forward. (See Top Picks.)