7 Big Buys By Citigroup

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 |  Includes: C, F, NSM, NYX, PBR, UTX, VIA, YHOO
by: Efsinvestment

Citigroup (NYSE:C) is among the most profitable investment banks. Last year, the company earned $2.2 billion in advisory fees. With $1.96 trillion in total assets, Citigroup is one of the largest institutional investors in the stock market. The investment titan offers several mutual funds managed by professional money managers. The group also offers private wealth management, as well as hedge fund services.

As of the 2011 second quarter, Citigroup had a financial-heavy portfolio of equities. Financial stocks constitute 45.79% of the holdings, followed by services (14.56%) and technology stocks (11.24%). Non-cyclical consumer companies constitute 8.37% of the portfolio. According to Edgar Online, Citigroup increased its ownership of 1676 stocks, while opening 339 new positions in the last quarter. I have examined the boldest 7 stock buys from a fundamental perspective, adding my O-Metrix grading system where possible.

Company Name

Ticker

Shares Held

% Change

% of TSO*

O-Metrix Score

NYSE Euronext

NYX

5.56 million

870%

2.12%

7.71

Yahoo

YHOO

52.18 million

19.58%

4.13%

4.4

National Semiconductor

NSM

4.51 million

2200%

1.78%

3.25

Ford Motors

F

14.02 million

243.47%

0.38%

7.07

Petro Brazil

PBR

4.41 million

342.49%

0.12%

6.34

Viacom

VIA

3.03 million

197.38%

0.58%

7.93

United Technologies

UTX

2.48 million

74.42%

0.58%

6.02

Click to enlarge

*TSO: Total share ownership by the Citigroup funds.

Data obtained from Finviz and Morningstar and is current as of Aug.19

NYSE Euronext operates several stock exchanges including the New York Stock Exchange, NYSE Arca, NYSE Amex LLC in the United States; and five European-based exchanges. The rumors on a new European tax on financial transactions have driven the stock to its 52-week low at $25.

Citigroup owns 5.56 million shares and increased its holdings by 870% in the last quarter. Total share ownership stands at 2.12%. As of the Aug. 19 close, the stock is trading with a trailing P/E ratio of 11.58, and a forward P/E ratio of 8.53. The yield of 4.75% is one of the best among financials.

Analysts estimate an annualized EPS growth of 10.64% for the next 5 years. Both institutions and insiders are bullish on the stock. Argus Capital has a price target of $35. NYSE Euronext has an O-Metrix score of 7.71.

Yahoo lost almost 22.31% since January, providing a fair entry point. Citigroup owns 52.18 million shares and increased its holdings by 19.58% in the last quarter. Total share ownership stands at 4.13%. As of the Aug. 19 close, the stock is trading with a trailing P/E ratio of 14.68 and a forward P/E ratio of 14.85.

Analysts estimate 13.07% EPS growth for the next 5 years, which is too optimistic given the -6.74% EPS growth of the past 5 years. The company does not have any debt issues. Current ratio of 3.13 and debt/equity ratio of 0.01 is one of the best in the industry. However, Yahoo is a fallen angel. Its only hope is to be acquired by a large competitor such as Microsoft (NASDAQ:MSFT) or Google (NASDAQ:GOOG). Yahoo has an O-Metrix score of 4.4.

National Semiconductor returned 80% since January. The company has an O-Metrix score of 3.25. Citigroup owns 4.51 million shares and increased its holdings by 2200% in the last quarter. Total share ownership stands at 1.78%. Texas Instruments (NASDAQ:TXN) concluded a definitive agreement to acquire National Semiconductor in an all-cash transaction of about $6.5 billion.

Instantly, National Semiconductor shares went berserk, rising an astounding 72.35 percent, or $10.18 per share, to $24.25. Texas Instruments CEO, Rich Templeton made the following statement on the deal:

National has an excellent development team, and its products combined with our own can offer customers an analog portfolio of unmatched depth and breadth. In recent years, National's management team has done an outstanding job of improving margins and streamlining expenses, which upon close will increase TI's profitability and earnings per share, excluding transaction costs.

Ford Motors lost almost 40% since January, offering a deep value to those interested. Citigroup owns 14.02 million shares and increased its holdings by 243.47% in the last quarter. Total share ownership stands at 0.38%. Analysts are extremely bullish on Ford. Barclays (NYSE:BCS), RBC Capital Markets (NYSE:RY), and UBS have target prices of $15, $19, and $22, respectively.

The mean target price is $20.6, implying more than 100% upside potential. The mean annualized EPS growth estimation for the next 5 years is 7.78%. Debt/equity and P/B ratios of 18.56 and 7.19 are strong red flags. However, investing in Ford can be extremely rewarding, if the economic recovery keeps going. Ford has an O-Metrix score of 7.07.

Petro Brazil lost almost 28% since January. Unlike Ford Motors, Petro Brazil has an excellent balance sheet. Citigroup owns 4.41 million shares and increased its holdings by 342.49% in the last quarter. Total share ownership stands at 0.12%. The stock is trading 36% lower than its 52-week high.

Analysts estimate an annualized EPS growth of 8.5% for the next 5 years. The company pays a yield of 0.58%. Trailing P/E ratio is 6.9, where the forward P/E ratio falls to 7.34. Petro Brazil has an O-Metrix score of 6.34.

Viacom lost 20.33% in the last month, but the year-to-date return of 4.07% is still in the positive territory. Citigroup owns 3.03 million shares and increased its holdings by 197.38% in the last quarter. Total share ownership stands at 0.58%. Analysts are extremely bullish on Viacom. Their mean price target of $58 implies almost 42% upside potential.

The stock is trading with a low P/E ratio of 11.99 and a lower forward P/E ratio of 9.62. Viacom pays a nifty yield of 2.45%. While the debt/equity ratio of 0.76 is a red flag, the company has a low PEG ratio of 0.79. Annualized EPS growth estimate is 15.08% for the next 5 years. Viacom has an O-Metrix score of 7.93.

United Technologies lost 6.23% in the last week and 23% in the last month. Citigroup owns 2.48 million shares and increased its holdings by 74.42% in the last quarter. Total share ownership stands at 0.58%. Both insiders and institutions have been buying the stock for a while. The company has a gross margin of 27.57% and a net margin of 8.93%.

Analysts’ mean target price of $96.83 implies almost 44% upside potential. As of Aug. 19, the stock is trading with a trailing P/E ratio of 13.05 and a forward P/E ratio of 10.90. The yield is 2.85%. Based on an annualized EPS growth estimate of 11.63%, United Technologies has an O-Metrix score of 6.02.

Find more information on O-Metrix Grading System here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.