Citigroup Proves 'Blue Chips' Aren't Infallible

The graphic below is a time-line of the Citi (C) debacle courtesy of the WSJ

click to enlarge

Graphic courtesy of the WSJ

This situation is a prime example of why investors should never take anything for granted or just assume that big name companies will never get into trouble. Around this time last year many analysts were screaming that investors should buy Citibank as if their lending losses weren't going to increase in the future, and investors actually had detailed information as to the extent of the toxic assets on their balance sheet.

Considering the information available at the time, the smarter thing to do would've been to advise investors to wait and see, as it was simply impossible to determine the true value of Citi's shares. Especially when you consider the mixed messages around Citi claiming earnings normalcy and then announcing new write-downs just days later.

Like I said, take nothing for granted, don't make assumptions about a company's future just because of "their name" and always hold back in situations where you don't have a complete view of a company's finances.

Mind you, none of this means that Citigroup won't emerge as an even stronger company in the future, but it does mean that I would be wary of risking my money with them until I see ample evidence that they're doing things around, as opposed to merely assuming they will and jumping in because the stock is mathematically cheap.

Disclosure: at the time of publishing the author didn't own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn't be viewed as financial or investment advice.

Comments

[icandoitdon:]

a waste of time and space.

2008 Nov 24 11:50 PM