Sunday, July 17, 2011

Hold Everything…. Citi a better buy than Goldman?

It’s a mind-boggling question to consider given one company’s unduplicated success during the past decade and the other’s sad-sack reputation: But today the argument could be made that Citigroup Inc. may be a better investment than Goldman Sachs Group Inc., at least according to MarketWatch

Consider that Citi on Friday reported a $3.34 billion second-quarter profit that represents a 24% increase against the same quarter last year. Goldman GS +0.21% , which reports later this month, will have to turn around what has been a string of lackluster-to-disappointing earnings announcements.

Both stocks are down year-to-date along with the battered banking sector. Citi shares are off about 17%. Goldman shares have tumbled roughly 25%. Citi is trading at 0.7-times book value with a 6% return on equity. Goldman at 0.97-times book value with a 10.4% return on equity.

One could argue that Goldman is actually overvalued given the huge litigation exposure it has stemming from the sale of mortgage securities. And a case could be made that Citi is actually undervalued given its global diversification, new management and the fact it has profit-eating baggage from the financial crisis.

More importantly, Citi is catching up to Goldman when it comes to creating profit. Citi has more potential and few expectations; it’s the other way around……

Find out more at http://www.marketwatch.com/story/is-citi-a-better-buy-than-goldman-2011-07-15?mod=MWCommentaryandBlogs&mod=marketwatch

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