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Citigroup (NYSE:C) bottomed when the broad market made its lows in early March. On March 9, Citi traded under $1. Less than two weeks later it was $3.80. Yesterday Citi closed at $2.69.

After the initial run, Citi has been held in a check by the arbitrage that accompanied the huge exchange offer with the holders of preferred stock. That exchange is now complete and this is what I have been waiting for to buy Citi.

The spread between the new Citi shares being issued (symbol C.wd) and the regular Citi shares has dropped to a range of 4-5 cents. Likewise, the synthetic Citi that could be created by shorting puts and buying calls is a similar 4-5 cents cheaper than regular Citi. The arbitrage should no longer put much downward pressure on Citi common.

I am aware of all the issues. The number or shares outstanding has mushroomed from under 6 billion to over 20 billion shares. Citi may still lose money this year and a profit next year is far from certain. There are articles about an energy trader who is apparently entitled to a $100 million bonus.

Make no mistake, this is a valuable franchise. Citi will readjust to its new reality, and you can make money buying the stock. Citi trades below tangible book value and a lot of the assets on the books may be worth more. The Smith Barney sale to Morgan Stanley looks good and Citi should receive additional payments.

Last fall I was in Russia and I had a Citi debit card. I saw a Citibank branch, went in with my debit card and got 5000 rubles in cash (about $175). I did not see any other branches of US banks. Just anecdotal evidence, but an indicator of the value in the Citi franchise.

I was waiting for the arb pressure to abate, and I think it has. I plan to buy Citi.

Disclosure: no position in C at this time.

Source: Why I'm Buying Citigroup Stock