Citi Still Has Plenty Of Price Appreciation

| About: Citigroup Inc. (C)

The last time I wrote about BioMed Realty Trust (NYSE:BMR) I stated, "At this particular moment, the company isn't anything special based on fundamentals and financials. The technicals are telling me there should be some downward pressure coming soon as it has run up in price quite a bit lately. For these reasons, I'm not going to be adding to my position right now." Since writing that article, BioMed Realty has dropped 5.11% and since it is time for my quarterly portfolio change-out I've decided to sell BioMed Realty out of the portfolio and replace it with Citigroup Inc. (NYSE:C) because I believe Citi has a lot more upside to it than BioMed Realty. Citi is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad range of financial products and services which include consumer banking and credit, corporate and investment banking, securities brokerage and wealth management. On October 15, 2013, the company reported third quarter earnings of $1.02 per share excluding CVA/DVA, which missed the consensus of analysts' estimates by a penny. In the past year the company's stock is up 52.21% excluding dividends (up 52.28% including dividends), and is beating the S&P 500, which has gained 27.17% in the same time frame. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis when compared to BioMed Realty to show why I've made the switch for the financial sector of my dividend portfolio.


The company currently trades at a trailing 12-month P/E ratio of 13.25, which is inexpensively priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 9.71 is currently inexpensively priced for the future in terms of the right here, right now. Next year's estimated earnings are $5.42 per share and I'd consider the stock inexpensive until about $81. The 1-year PEG ratio (0.86), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is inexpensively priced based on a 1-year EPS growth rate of 15.4%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 15.4%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 19.27%. Below is a table of the fundamental metrics I look for in a company and shows how Citi fairs against BioMed Realty. All data is as of 02Dec13.


Price ($)


Fwd P/E

EPS Next YR ($)

Target Price ($)


EPS next YR (%)


















On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 0.08% with a payout ratio of 1% of trailing 12-month earnings while sporting return on assets, equity and investment values of 0.8%, 8.2% and 8.6%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I don't believe the 0.08% yield of this company is good enough for me to take shelter in for the time being. Below is a table of the financial metrics I look for in a company and shows how Citi fairs against BioMed Realty. All data is as of 02Dec13.


Yield (%)

Payout TTM (%)

ROA (%)

ROE (%)

ROI (%)














(Click to enlarge)

Looking first at the relative strength index chart [RSI] at the top, I see the stock dropping from overbought territory with a value of 64.34 with downward trajectory, which is a bearish pattern. To confirm that, I will look at the moving average convergence-divergence [MACD] chart next and see that the black line is above the red line with the divergence bars decreasing in height, indicating another bearish pattern. As for the stock price itself ($52.62), I'm looking at $54.99 to act as resistance and $51.61 to act as support for a risk/reward ratio, which plays out to be -1.92% to 4.5%.


These are two different types of financial companies, fundamentally I believe BioMed Realty to be expensively valued based on future earnings, but I also feel that it can drop in price dramatically based on those earnings because they are expected to contract in the next year. Citi on the other hand I believe to be extremely inexpensive based on future earnings and the main reason I'm buying into the stock. Financially, I'm giving up quite a bit of dividend but I believe it is okay because I like the capital appreciation opportunity much better with Citi. On a technical basis, Citi is exhibiting bearish trends. Though I've already initiated my position in Citi at the time of this writing, I will not be buying any more shares right here even though I like the longer-term price appreciation story. I will provide reports on how each is doing against each other as the future progresses.

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: I am long C. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.