Citigroup (C) Shares Set to Outperform As Latest Treasury Stock Sale Nears an End

September 15, 2010 12:13 PM EDT
We are hearing that the U.S. Treasury is nearing, or has completely finished, selling its latest traunch of Citigroup (NYSE: C) stock. If true, then Citigroup shares could be set to outperform the market.

The latest traunch was the third trading plan from the U.S. Treasury and covered 1.5 billion shares and was initiated on July 23, 2010.

If complete, this would bring the government's stake in Citigroup down to 3.6 billion shares. The government started with 7.7 billion shares.

Because this third trading plan is set to terminate on September 30, it would seem unlikely that the Treasury would start up a new trading plan ahead of the quite period for third quarter earnings which is expected to begin on October 1.

Citigroup has unperformed the market when the Treasury is selling and outperformed when they took a break.

Since the latest sales plan was announced, Citigroup is down 4 percent. During this same time the Financial Select Sector SPDR (NYSE: XLF) is up 2 percent and the S&P 500 is up 3 percent.

Last quarter during the time that the Treasury didn't sell stock (July 1 - July 22) the stock was up 9 percent. This versus a 6 percent rise in the S&P 500 during that time-frame and 4.6 percent rise in the Financial Select Sector SPDR (NYSE: XLF).

This break in the selling pressure won't last very long. Citigroup will issue its third quarter results at approximately 8:00am ET on Monday, October 18, 2010. The Treasury will likely resume sales shortly after. The good news though is the government is getting closer and closer to completely exiting Citigroup. By the end of the year they could be done, if not sooner if Citigroup buys the last piece back in a planned purchase.

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