The US Treasury’s decision to sell its stake in Citigroup marks a turning point for the banking giant. This is Uncle Sam’s stamp of approval. Citi was once the figurehead of institutions that were deemed “too big to fail.” It caught a lot heat for being one of the players responsible for the global financial crisis. Even though it took Citi longer than other banks to reach this point, it might be a good sign because it shows they took the time to make sure Citi was ready for independence. Or it could also mean the Treasury is getting out while the getting is good. Either way, Citi is now free to reinstate dividends and is free from government restrictions.
One point to keep in mind - Goldman Sachs forecasts a gain of 25% for the S&P 500 in 2011, and over the past year, Citi has had a ridiculously strong correlation to the S&P 500. See the 1m + 3m + 6m + 1Y + YTD charts. If you trust Goldman’s S&P forecast, Citi would make a great play.
Citi guided by S&P, a return to greatness? - www.hiddenlevers.com/hl/u?gTgaYX
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.