Author Topic: What are you buying today?  (Read 2206510 times)

rpadebet

  • Hero Member
  • *****
  • Posts: 726
Re: What are you buying today?
« Reply #320 on: January 31, 2014, 12:22:09 PM »
Bought some JPM and GM.
You can't connect the dots looking forward you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something: your gut, destiny, life, karma, whatever.
                       - Steve Jobs


wescobrk

  • Hero Member
  • *****
  • Posts: 827
Re: What are you buying today?
« Reply #321 on: February 01, 2014, 08:31:08 AM »
So far I look like an idiot with citi.
I don't  understand why bac is trading at 12.5x earnings and citi is at 9.5.
I didn't think the market would wait till March 1st and then the banks would shoot up for ccar 3 years in  row.
I thought it would happen by now.
I'm ready for mid march when the dividend raise is announced and in April when citi can start buying back stock.
In the aftermarket it was trading at 15 percent discount to tangible book but it earned 8 percent last year and this year is 9 percent on tangible book.
The irr is well over 10 percent.
Interest rates are at zero and the 10 year treasury is at 2.6 and we are suppose to grow at 3 percent GDP according to Moynihan and other bank ceos with the biggest loan and deposit growth in years.
The risk premium with citi is about 800 basis points.
I feel like I'm living on an island and no one else sees this.
I'm not arguing it should be at 12.5x earnings like back but 9.5?
I don't get it. It should at least be at 11x earnings.
The bloody earnings rate for the investor is higher than the multiple.
And this is a company that earned 4.42 this year, projected by all analysts to earn 5 this year and 5.85 next year.
And a dta worth a third of the market cap.
That's part of being a value investor willing to look like you are on a deserted island.

fareastwarriors

  • Hero Member
  • *****
  • Posts: 4187
Re: What are you buying today?
« Reply #322 on: February 01, 2014, 08:46:55 AM »
So far I look like an idiot with citi.
I don't  understand why bac is trading at 12.5x earnings and citi is at 9.5.
I didn't think the market would wait till March 1st and then the banks would shoot up for ccar 3 years in  row.
I thought it would happen by now.
I'm ready for mid march when the dividend raise is announced and in April when citi can start buying back stock.
In the aftermarket it was trading at 15 percent discount to tangible book but it earned 8 percent last year and this year is 9 percent on tangible book.
The irr is well over 10 percent.
Interest rates are at zero and the 10 year treasury is at 2.6 and we are suppose to grow at 3 percent GDP according to Moynihan and other bank ceos with the biggest loan and deposit growth in years.
The risk premium with citi is about 800 basis points.
I feel like I'm living on an island and no one else sees this.
I'm not arguing it should be at 12.5x earnings like back but 9.5?
I don't get it. It should at least be at 11x earnings.
The bloody earnings rate for the investor is higher than the multiple.
And this is a company that earned 4.42 this year, projected by all analysts to earn 5 this year and 5.85 next year.
And a dta worth a third of the market cap.
That's part of being a value investor willing to look like you are on a deserted island.


 Citi has a much bigger presence in EM markets than the other big universal banks.
I think the Emerging Market 'crisis' is dragging down C. Investors/traders sell this because they are afraid of the EM exposure.

wescobrk

  • Hero Member
  • *****
  • Posts: 827
Re: What are you buying today?
« Reply #323 on: February 01, 2014, 09:19:39 AM »
They do have a bigger presence but so far I haven't heard of any impairments..
Their max loss to Argentina is less than a billion.
If this doesl turn into 97-98 again I can see that but it's a lot different now compared to then. Floating currencies, less external debt.

China just released their January pmi at 50.5. They are still expanding.
I think within 2 weeks we will shoot upward.
I plan to be better protected in the future though.

wescobrk

  • Hero Member
  • *****
  • Posts: 827
Re: What are you buying today?
« Reply #324 on: February 01, 2014, 10:03:47 AM »
It looks like cities max exposure to Argentina is 17 cents a share.
They have a lot more exposure to Brazil and Mexico.
That would be the time to get worried, if it spread.

My comment about it not lasting more than 2 weeks is speculation of course as psychology can feed on itself.
My earlier post was trying to wrap my head around the  25 percent discount to bac.
If there is contagion with em I suppose that discount is warranted.
Mexico seems to be doing quite well.
Anyone on thew board follow EM closely?

If so, what is the probability of contagion and things getting much worse?

no_free_lunch

  • Hero Member
  • *****
  • Posts: 1911
Re: What are you buying today?
« Reply #325 on: February 01, 2014, 10:24:21 AM »
Wescobrk,

Pre 08/09 did C generally trade at a premium or a discount (based on earnings multiples) to BAC and the other domestic banks?

wescobrk

  • Hero Member
  • *****
  • Posts: 827
Re: What are you buying today?
« Reply #326 on: February 01, 2014, 10:35:48 AM »
I honestly don't know.
It use to sell at multiples of book value but that won't ever happen again.
It probable sold around the same multiple of bac and jpm pre 08.

damianolive

  • Newbie
  • *
  • Posts: 17
Re: What are you buying today?
« Reply #327 on: February 01, 2014, 12:34:48 PM »
Comparing multiples to book or tangible book may not be the best alternative for Citi right now. If you instead look at price to basel 3 tier 1 capital used at Citicorp (i.e. excluding Holdings) and compare that to BAC and JPM, they are very similar (1.4x in all 3 cases). This makes sense considering that capital tied up at Holdings has a negative return now. However, this ignores the high probability that Holdings will break even in the near term as well as the pace of capital build up at Citicorp from earnings, DTA use and decline in Holdings RWA. Citi is on its way to massive over capitalization in the next 2-4 years and the stock price doesn't reflect it. This is perhaps reasonable given Citi's performance in the 2012 ccar (who knows if shareholders will get their hands on that excess capital) but it sill ignores the ~20% annual growth in basel 3 tier 1 capital that Citicorp can achieve in the next 3 years just by staying the course (i.e. using Wall Street consensus numbers, which assume modest earnings growth).
 
As a side note my work relates to investing in EM and I'm from Argentina. The issues going on there are specific to the country, I don't think the chances of contagion are high, but we'll see.

wescobrk

  • Hero Member
  • *****
  • Posts: 827
Re: What are you buying today?
« Reply #328 on: February 01, 2014, 01:25:23 PM »
"Comparing multiples to book or tangible book may not be the best alternative for Citi right now. If you instead look at price to basel 3 tier 1 capital used at Citicorp (i.e. excluding Holdings) and compare that to BAC and JPM, they are very similar (1.4x in all 3 cases). This makes sense considering that capital tied up at Holdings has a negative return now. However, this ignores the high probability that Holdings will break even in the near term as well as the pace of capital build up at Citicorp from earnings, DTA use and decline in Holdings RWA. Citi is on its way to massive over capitalization in the next 2-4 years and the stock price doesn't reflect it. This is perhaps reasonable given Citi's performance in the 2012 ccar (who knows if shareholders will get their hands on that excess capital) but it sill ignores the ~20% annual growth in basel 3 tier 1 capital that Citicorp can achieve in the next 3 years just by staying the course (i.e. using Wall Street consensus numbers, which assume modest earnings growth).
 
As a side note my work relates to investing in EM and I'm from Argentina. The issues going on there are specific to the country, I don't think the chances of contagion are high, but we'll see."

Thanks for your comments.

I've seen estimates for 25 cent dividend and 5-7 billion in buybacks in March.
They are estimating roa of 90-110 by next year so I'm assuming assuming holdings will be at break even by late next year.
2015 and beyond ccar should be very attractive.

alertmeipp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2545
Re: What are you buying today?
« Reply #329 on: February 01, 2014, 08:14:31 PM »
C - What is happening at emerging market exactly.. I check Turkey's currency, it's down a few percent... but seems not that much.. and what else?