Citigroup (C) Set to Ramp Higher After Overhang Is Removed

Posted by Easystockalerts.com Staff on Aug 3, 2010

There is one driving factor that makes Citigroup (NYSE: C) the second most followed stock at Easystockalerts.com. It is this: investors believe it is going "much, much higher."

Citigroup of course was on its death bed during the financial crisis due to all the sour loans the company held on its books. The company was forced to run to the government for bailout after bailout to stem a collapse that would have made Lehman Brothers look like child’s play.

Today though things are different at Citigroup. Profit and sales are surging, the company has a leaner, meaner focus and is expanding in key foreign markets.

With all the positives, Citigroup still has the residual effects of its near-death experience. Namely, the U.S. government and other inventors were given billion of common shares of the company stock in an preferred-for-common exchange that boosted the company’s capital ratios but also boosted the share count to an astronomical 29 billion shares, or enough to give every U.S. citizen about 100 shares.

Of the massive new share count, the U.S. government’s stake is 7.7 billion shares. Since April 26, 2010 the Treasury has been selling its stake and has now sold at least 2.6 billion and has a current sell program ongoing for another 1.5 billion shares.

This government selling has clearly created overhang in the stock. In fact, a StreetInsider.com report showed that shares of Citigroup have underperform the broader market during the U.S. sell programs, while outperforming when the sell program was paused.

But there is light at the end of the tunnel for Citigroup. By the end of the year the government is expected to be finally done selling it shares. This would alleviate the selling pressure that has averaged about 7% of the daily volume in the stock. Investors expect that once the government is out of the way, "the sky's the limit."

Wall Street analysts too have been positive on the stock. Following the recent Q2 results, Barclays reiterated their Overweight rating and $6 price target on Citiroup. The firm said the results were further evidenced on the company’s continued progress. They also noted that , “at a 7% discount to tangible book (which grew 2% in the quarter to $4.19), it's the cheapest Large-cap bank stock on that basis.”

So it may be a wise move to follow other Easystockalerts.com members and Wall Street and start tracking Citigroup today. Set up free e-mail news alerts on Citigroup here.

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