Im talking about Citigroup( NYSE:C) here of course. Full disclaimer, I am empolyed by Citigroup. Over the last 5 years Citi's stocks has traded roughly between the $40-50 levels. Technicians of the stock market call this a "trading range". However, recently Citi's stock has been on a tear, closing at new highs near $54/shares as of December 15. So why the move? No one really knows for sure, but here are some ideas being thrown around:
1. The stock is simply cheaper that its peers with respect to its price to earnings ratio. In English, what you are paying for a share of Citi stock in relations to what the company can earn in profits over the next couple of is relatively cheap. Citi's competitors include JPM Morgan/Bank of America/Capital One/Goldman Sachs.
2. The FED is not expected to increase interest rates in the future. Citi's credit card business borrowing costs will remain stable or possibly decrease in the future. Also, the big money managers may be rotating money into the Financial sector in anticipation of a rate reduction by the Federal Reserve.
3. The overhang of intergrity and litigation problems from the late 90's and early 2000's seem to be waning.
4. The make a ton of money. Citigroup's profits come in around $4-5 billion EVERY 90 DAYS. That puts it up there with the top 5 most profitable companies in the world.
5. Citi's dividend yield in near 4%. So you get paid to hold on to the stock.
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