Citigroup (C) Shares Can Outperform Despite New Treasury Share Overhang
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Price: $138.07 +3.52%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 2.1%
Revenue Growth %: +7.3%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 2.1%
Revenue Growth %: +7.3%
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Since the U.S. Treasury started selling its Citigroup (NYSE: C) common stock earlier in the year one trend has developed - "When the government is selling you should run for the hills."
The only reprieve from the selling pressure has been the quite periods surrounding earnings releases, during which time the Treasury temporarily halts sales. During these brief periods, shares of Citigroup have outperformed peers and the broader market. During the latest pause (Oct 1-Oct 19), shares of Citigroup are up 3.6%, nearly double the 1.9% move in the S&P 500 and significantly outperforming the XLF (NYSE: XLF) which showed only a 0.7% gain.
Now that the blackout period surrounding Citigroup's third quarter results is over, the Treasury announced yesterday that they will resume sales and announced a fourth 1.5 billion share sale plan.
Before any share sales started from the new plan, Treasury had 3.6 billion Citigroup common shares, which is down from the 7.7 billion they started with. After this trading plan its stake will be reduced to 2.1 billion shares, or approximately 7 percent of total shares outstanding. This is down from a high of approximately 27 percent.
While the trend of under-performance has been prevalent since the government selling started, this time around could be different.
Notably since the start, Treasury has been selling its shares of Ciitigroup just south of tangible book value per share. Their average selling price has been $4 through the process. In the latest quarter though Citigroup's tangible book value per share rose sharply to $4.44, up from $4.19.
An argument could be made that the Treasury could let shares drift higher before banging the bid - maybe around $4.30-$4.40.
Speculators may be wise to make the bet that shares of Citigroup can outperform the broader market this time around despite the Treasury share overhang.
The only reprieve from the selling pressure has been the quite periods surrounding earnings releases, during which time the Treasury temporarily halts sales. During these brief periods, shares of Citigroup have outperformed peers and the broader market. During the latest pause (Oct 1-Oct 19), shares of Citigroup are up 3.6%, nearly double the 1.9% move in the S&P 500 and significantly outperforming the XLF (NYSE: XLF) which showed only a 0.7% gain.
Now that the blackout period surrounding Citigroup's third quarter results is over, the Treasury announced yesterday that they will resume sales and announced a fourth 1.5 billion share sale plan.
Before any share sales started from the new plan, Treasury had 3.6 billion Citigroup common shares, which is down from the 7.7 billion they started with. After this trading plan its stake will be reduced to 2.1 billion shares, or approximately 7 percent of total shares outstanding. This is down from a high of approximately 27 percent.
While the trend of under-performance has been prevalent since the government selling started, this time around could be different.
Notably since the start, Treasury has been selling its shares of Ciitigroup just south of tangible book value per share. Their average selling price has been $4 through the process. In the latest quarter though Citigroup's tangible book value per share rose sharply to $4.44, up from $4.19.
An argument could be made that the Treasury could let shares drift higher before banging the bid - maybe around $4.30-$4.40.
Speculators may be wise to make the bet that shares of Citigroup can outperform the broader market this time around despite the Treasury share overhang.
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