Shares of Citigroup (C) rose 6.32% after-hours closing at $4.04 per share. Most of the investment pundits are calling Citigroup a “Buy”.

The news broke out that Citigroup received the contract worth $7.7 million to administer the “Cars for Clunkers” program. Recently, all the news surrounding Citigroup have been positive.

Here are Jim Cramer’s top 5 reasons for buying Citigroup shares right now.

“Cramer’s first reason: Simply, it’s cheap. Dirt cheap. Although it’s difficult to figure out what Citigroup worth and what it is going to earn, but Cramer has identified its book value at about $4 per share. Cramer sees the bank, with a global franchise and profitability in hand, should sell at 1.5 times book value, not to mention that book value looks to be on the rise. Doing some basic algebra, this means you have a $6 price target.

Second: On September 10th the government is free to start selling its 34% ownership position in the company. Here’s where he sees your opportunity to close the budget deficit. Take into account that right now the government is up almost $5 billion on its position in Citigroup. If Cramer’s price target is correct, the government and the taxpayer may have a $20 billion windfall on its plate.

Reason number three: Citigroup is the dominant bank in 108 countries outside of the United States with fifty percent of its business is in emerging markets. Citigroup is a global franchise that will recover with the rest of the world, even if America lags behind, Cramer says.

Fourth: The company is getting itself out of bad loans and doing it fast by dividing the bank into Citigroup Holdings and Citigroup proper. The latter is one-third retail banking, one third global services and one-third investment banking, which is composed of underwriting and fixed income trading. These three portions of the business are extremely profitable already, and Cramer thinks this reorganization will bring out value and help the stock make it to the $6 mark.

Fifth and final reason: The company’s existing management. Cramer doesn’t see either CEO Vikram Pandit or CFO Ned Kelly, aren’t going anywhere, as government would be out of their minds to replace them.

And why is the stock down in the 3 dollar range? The government’s dilution was terrible for existing shareholders and mortgages and credit cards certainly have the potential to go sour in a sluggish economy, but Cramer sees things on the rebound and Citigroup is heavily reserved to avoid any problems in the future.”

By: Paul Toscano

Source

No related posts.