By Jeff Bailey
It's hard to argue with the editors at Barron's who laid out their top 10 stock picks for 2014 over the weekend. After all, the 2013 list is beating the S&P 500 by nearly ten percentage points and included such smart calls as Blackrock (BLK), Viacom (VIAB) and Western Digital (WDC).
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Well done, Barron's.
With the 2014 picks - which include bold choices US Airways (LCC), Barrick Gold (ABX) and Deere (DE) - we have just one nit: Citigroup (NYSE:C). Yes, yes, yes - it remains a turnaround and is so beaten down it will very likely rally further in 2014. And it may indeed outclass many other bank stocks in doing so.
But is this a company you should own long term? One of Barron's main reasons for recommending this stock, other than its cheapness, could easily be an argument for not owning it. Citigroup, the publication notes, "has the best international franchise among major banks." It's in 100 foreign countries, we're told, and gets nearly 60% of revenue from outside North America.
In theory, well, super. Faster-growing economies and all that. Citigroup beat other U.S. banks into these markets.
In practice? Foreign markets are unkind to banks (and to most companies; ask Wal-Mart (WMT), where the international business grows but its margins disappoint.). They tend to overpay (either by way of price or by taking on excessive risk) for acquisitions overseas. Even with locals hired on the ground, a U.S. bank will have a harder time, we would argue, avoiding crummy customers than would local lenders.
Worst of all: it's complex and banks ought to strive for simplicity, we believe. The No. 1 competitive advantage in banking is not screwing up (ask Lehman Bros. or WaMu) - or, more precisely, avoiding the costly errors your competitors are likely to make. Keeping things
