Want a Piece of Citigroup? Think Twice Before Following Eddie Lampert

We learned Tuesday that Eddie Lampert had bought $800M of Citigroup (C) stock starting in 2006, which is creating excitement among value investors who are now taking a second look at Citigroup, to see why Lampert likes it so much.

The reasons to like Citigroup are obvious. At 10x earnings and sporting a 4% dividend yield, this is absolutely a safe investment and a turnaround play all in one.

But I won’t be buying Citigroup stock and neither should other ambitious individual investors. The reason is simple: there are other ways you can earn higher returns on your capital. Lampert is very smart but he is managing so much money he (and other hedge funds) can’t invest in companies like Peace Arch Entertainment (PAE) or Premier Exhibitions (PRXI).

So before you jump on the train with Lampert, remember that he doesn’t have the same investment opportunities that you have.

Still want a piece of Citigroup? Well LEAPs (long term stock options) are probably the best way to go. This is a stock that is not likely to fall and with options so cheap these days I think some in-the-money long-dated calls on Citigroup would be the way to play this one, if you were so inclined.

C 1-yr chart

Disclosure: Author is long PRXI and PAE and has no position in C