Citigroup Inc. (C)

Yield curve's in better shape than it's been for a long time. The space will see lots more M&A. Attractive valuation, looking at 23% growth over the next few years and trading at 8x PE.

He's trying to play a quiet offence when he's a bit scared of the markets and tariffs. Cheap, tethered, and insulated. Financials really get a bid from Trump -- tax cuts, less regulation, lots more M&A. Yield curve looking a lot better, upward sloping. Beat Q4, earnings up 40%. Investment banking and market revenue also up. Company's expecting ROE to improve to 10-11% in 2026. Trades under 9x. Very favourable risk/reward. Yield is 2.7%, decent.

Reducing global presence by exiting unprofitable businesses is really helping earnings by lowering costs.

They reported a strong quarter this week, beating top and bottom lines. Sales and trading saw the biggest growth while costs are under control. They gave the most forward looking guidance of the banks this week. Revenue forecast for 2025 was up and they announced a huge $20 billion share buyback.

Banks earnings happen next Wednesday: JPM, Goldman, Wells Fargo and Citi. He expects good reports from all. The expected increase in M&A will benefit all. These stocks are off their highs at very low PEs. He's been buying them.

A story of going from very bad to less bad to good. Selling assets. Trades ~7x, in line with other banks. But growing around 24% CAGR over the forecast horizon 2025-27. Beneficiary of the new Trump trade combined with cost cuts. More growth than either JPM or BAC. Yield is 3%.

Own in a registered account.

Owns this and JPM. Trades at a much cheaper 70% of book vs. JPM's 2x book.

Trades below book value. Going through large restructuring, which can make earnings numbers volatile. So you have to be careful. All banks should do well in next several years with deregulation coming. Yield is ~3.2%.

He prefers BAC or JPM.

Likes the upside potential with strong dividend (downside protection). Yield curve has smooth out - interest rates also falling. Very strong balance sheet with high lending capabilities. Company moving toward reducing global presence - capitalize on the USA. Less regulation under Trump presidency will also help company. 

Business has done a great job YTD (~20% share price appreciation this year). Earnings growth this year very good. New CEO doing a good job. Share price has been flat - hard to grow in the USA. Would hold at current share price level. Not buying, or selling. 

Because of today's strong jobs report, credit delinquencies won't be as bad as feared, which benefits Citi.

The CEO has done a great job the last 2 years, consolidating it a bit and focusing it to turn around the company. It remains not best in class, though trades at an unheard of 70% of book value. There's upside to earnings. The valuation gap with peers is closing. Likes it overall.

He likes banks as a group and Citigroup is probably the worst performer of them. It will play catch up with JP Morgan, etc. and could be a rotation play. When rates fall the spread widens so this is good for banks.

Long been in the doghouse, but the new CEO has pared foreign exposure and made the company more efficient. Remain cheap at a 36% discount to tangible book value. They will rapidly boost earnings. 

Owns both, for different reasons.

JPM is the best bank in the US, perhaps the world. Jamie Dimon is the smartest banker around, and has his own money invested in the bank. Management has a deep bench. Not cheap, but he's not selling. Might grow 12-15% a year.

Citi is a turnaround, trades below book value. Most of the others trade at a premium. Owns a number of great, capital-light businesses. Doing a good job getting out of the morass of last 15 years. Doesn't usually buy turnarounds, but at 1/3 book value it was too cheap to pass up. Looking for a double in the next 3 years.

Still low-hanging fruit, despite big run. At 9x, cheaper than most Canadian banks. Beat last quarter, EPS up 10% YOY. Beat on revenue. Making progress on reorganizing and optimizing costs. Will be beneficiary of lower rates and steepening yield curve. Should benefit from this great rotation where people are looking to own things other than tech. $1B in buybacks in this current quarter is a very nice tailwind. 25% growth rate. Yield is 3.5%.

What's not to like at these levels?