I Sold Citigroup Today

About two weeks ago, I got caught up in speculation mode and bought into Citigroup at $19.95 per share. I saw an undervalued company that the market beat on – and scooped it up. Getting caught up in speculative trades is easier than you think. Even disciplined investors can easily be swayed by millions of investors with billions of dollars.

I sold Citigroup today for $23. I convinced my friends to do the same (successfully), who sold closer to $24. My total return in two weeks was about 12%. I am pleased with my decision to sell, and a little less so pleased with my decision to purchase. Here’s why.

Citigroup is one of the more solid companies in the world. They have historically held the highest market cap position in the financial sector for quite some time (until recently). With the market beating down the entire sector (rightfully so), I saw the stock’s value somewhere nearer to $28 per share or so. I’m modestly pleased with my stock purchase because it was a true value decision. Just buy and wait for the knee jerkers to leave the room. But I’m not thrilled with my decision because a value pick is only as good as the company is. And all we had to do was to keep reading and researching and Citigroup has a lot of fundamental management issues in the company. Firstly, they along with many other major banks in the sector are losing money fast. Although Citigroup posted $28 billion of revenue last quarter, they had a $10 billion loss in net income (due to subprime write-downs and the like). Secondly, they have a new inexperienced CEO in there (Vikram Pandit). Although he may very well turn the company around – the winds are against him. The company has an earnings release on the 18th of April, and you can expect some major volatility leading up to that. As Warren Buffet said “Better to buy a great company for a fair price than a fair company for a great price”. Which is essentially why I’m split on whether or not this was a good purchase.

As for as selling the stock – I avoid greed and gambling and uncertainty. Buying the stock on a major drop while counting on this volatile market paid off quickly for me. Get in, make your money and meet your goals (I had a sell price of $23 on the stock before I even purchased it), and then get out quick. Avoid the volatility. For the record, I think Citigroup is a buy until about $28. I’ll say it’ll hit this price within twelve months. I however won’t enjoy this long term play simply because it’s out of my risk profile. If you’re more of a gambler – then by all means scoop up some more shares on the next drop. But not because I told you to.

I don’t like trading – the risk is too high for not enough compensation. I’m not a gambler. This stock probably was the riskiest I’ll push myself. Now its time to turn my earnings into another stock pick.