This time they may be correct.
It has been more than seven months since Citi shares last breached $5, and more than 15 months since they closed at more than that amount. The stock hasn't traded consistently at more than $5 for about two years.
Citi shares closed at $4.62 Tuesday, up 3.82%. More than 3.2 billion Citi shares traded, representing nearly half of the New York Stock Exchange's total volume of 6.9 billion. The stock surge came shortly after the Treasury Department announced it had priced and begun to exit its final tranche of Citi stock.
During the height of the financial crisis in 2008, Citi shares crashed from around $30 to less than $7 and eventually traded for less than $1 as the firm appeared at the brink of collapse. The federal government prevented such a catastrophe by investing $45 billion into the bank.
The tsunami of taxpayer funds has diluted private shareholders and put a lid on stock performance for quite some time. But as the Treasury continues to unwind that stake -- which now stands at 12% -- the same factor cited as an overhang has kept Citi shares relatively resilient. While other big bank stocks are down anywhere from 5% to 25% since the start of the year, Citi is up more than 33%. Its stock didn't decline as much during the selloff between mid-April and late-August and it has been moving incrementally higher since then.
Now that the government is exiting Citigroup, there's a good chance 2011 could see sustained upside in the stock -- particularly as the bank begins executing on a growth strategy abroad while getting rid of most of its "bad bank" U.S. assets. Those asset sales, the argument goes, will generate more capital to put toward higher-yielding investments abroad and the restoration of Citi's dividend, which was extinguished in 2008. - By Lauren Tara LaCapra, http://www.thestreet.com
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