Citigroup – is it sleeping now (NYSE: C)

This is the sixth installment of my look at the Dow Jones Companies, the thirty finest American companies. Today we’ll be looking at Citigroup. This company is now trading somewhat in the doldrums due to the rather tricky credit crunch. Having already looked at JP Morgan, many banks are under pressure, underwater, could this be the right time to buy into the banking sector?

Citigroup (NYSE: C)

Citigroup is a worldwide financial service with 200 million accounts in more than one hundred countries. It provides a range of financial products to governments, consumers and corporations that includes investments, brokerage accounts, wealth management and consumer banking and credit. It merged with Travelers Group in April of 1998 and as of 2008 is one of the world’s largest banks (having dropped from first place just recently).

Early History

Citigroup began in 1812 as the City Bank of New York. As the company grew and absorbed other businesses and banking institutions, it diversified to include many different financial interests such as insurance companies and brokerage firms. Because of the diversity of its many branches, each balances out the other as financial cycles rise and fall.

Citigroup has historically been a very good investment due to this long-range planning for stability. However, the corporation has been involved in many questionable practices. In 2004, Citigroup disrupted the European bond market by selling billions in bonds and then buying them back cheaply when their trades forced the market to drop.

Would you tell your grandmother?

In 2005 the NASD levied more than $21 million in fines against Citigroup for violating mutual fund sales practices. In 2007, NASD again fined Citigroup more than $15 million for misleading retirees in seminars and not adequately disclosing risks to those investors. The banking institution was also heavily implicated in the Terra Securities scandal which negatively impacted the United States bond market. Just this year, in 2008, the attorney general of California disclosed that Citigroup was guilty of a computerized “sweep” that robbed its customers, mostly poor or recently deceased, and deposited their money in the bank’s general fund without notifying the victims of the robbery.

A Laggard, Really

Citigroup has underperformed for the past half decade, showing losses in nearly every quarter according to the Dow Jones Industrial Average index. Although the diversity of financial products and investments would seem to make Citigroup an excellent choice for a healthy portfolio, its questionable business practices and recent poor decisions should be cause for second thoughts. Whether or not business ethics matter to you as an investor, the recent spate of bank failures combined with Citigroup’s losses in the past few years indicate that a great deal of caution is advisable when considering Citigroup as an investment.

Caution is certainly the word: having grown its dividend steadily for years, the recent losses forced Citigroup to cut its dividend from 54 cents to 32 cents, this bank may warrant careful scrutiny if you should be interested in it. It currently falls at or near the bottom of the Dow Jones, and is of interest to Dogs of the Dow investors. But a look at the charts indicate that it has lost more than 60% of its stock value since the latter part of 2007. It is currently still loss making. Are you willing to take a punt? But then when there are still lots of other profit making banks out there, why would you?

Purchase Order: 10 DIA at 105.14

Just a quick note: I purchased 10 shares of DIA at 105.14 or thereabouts this afternoon. I had originally owned this stock (ETF) about three years ago, and regretted selling it. I was finally able to buy the shares back cheaper than I sold them. Of course, I lost out on the dividends on the intervening years totalling over $6 per share (after tax); I think these stocks represent a good price, and that the bailout (part 2.) will pass this time around, so I’m kind of expecting a turnaround shortly on the DJIA. Whether it will last or not, I don’t know. But the PE of 12 and yield are beginning to look attractive.

Oddly, though, the stock is already cheaper than I paid. I guess the markets don’t have any confidence in Congress as it’s already trading down.

I’m not recommending this stock, etc. please read my disclaimer.

Should I have stuck with those old stocks…? Let’s See.

Just occasionally in the heat of compulsive decision making, one loses the grand perspective! Really. In 1998, I started trading in the US stock market, I still remember the trepidation and fear that accompanied my first online stock purchases. In those days, I was a Motley Fool reader and bought some suggested stocks based on their ideas. It was a fairly decent portfolio that I purchased for about $8357.84.

Today, I was going through records today of my first stock purchases and here is what I bought in 1998…

The first column is the number of stocks, the stock symbol, the price I paid, the trading cost and the total costs.

18 GM 56.5625 9.99 -1028.12
11 JPM 86 9.99 -955.99
14 MMM 70.1875 0 -982.63
23 MO 42.6875 9.99 -991.8
10 DELL 58.5 9.99 -594.99
10 DELL 59.6875 9.99 -606.87
14 ATHM 73.2344 9.99 -1035.27
25 CAT 42.4375 9.99 -1070.93
25 IP 43.25 9.99 -1091.24
Total -$8357.84

I don’t know how I would have fared in the long run otherwise as I had to sell my stocks then repurchased others… I’m pretty sure my track record isn’t that good. But let’s see if I had just forgotten them for 10 years. What would they be worth now?

The list: ups and downs!

ATHM is now worth $0 … ah, those tech stocks. Can anyone remember what happened to ATHM? I sold out before taking a small loss. I noted that price, because I can’t remember what happened to them after that. All prices are calculated at today’s rates (obviously volatile).

The first column is the number of stocks, the stock symbol, the current price per stock, the total accured dividends, and the total value of the purchase as of today.

18 GM $13.14 $590.90 $827.42
33 JPM $39.94 $460.02 $1,778.04
28 MMM $68.49 $420.56 $2,338.28
23 MO $20.46 $2,265.94 $2,736.52
40 DELL $24.41 $0.00 $976.40
28 ATHM $31.75 $0.00 $889.00
50 CAT $71.15 $432.00 $3,989.50
25 IP $23.21 $262.50 $842.75
Total Purchases $14,377.91

Overall, if I had done nothing in the past ten years, I’d have made over $6,000 on just those stocks, including splits, dividends and spin-offs. If you look at the stocks, you’ll see that that there is a HUGE divergence of performance over the past ten years,

Would I have beaten the Dow Jones?

As it so happens, the DIA ETF started trading the same quarter, so I’m able to track the performance of buying this ETF. (In fact, I did buy it at one point.) Anyway, using a notional monthly average, I’d have been able to buy 106 shares in DIA in 1998. Adding dividends to the total, I’d have made $14,286.68 in those years, so I’d have beaten the stock market but not by much!

Sobering Reality

In reality, I bought and sold more stocks than I remember, I rode the bubble and the coming collapse. Then I failed to sell as stocks tumbled. I then lost ‘interest’ and just sat there stuck in the headlights. Since 2003, I’ve been pursuing a more dividend focused story than ever, and today’s research really shows that dividends would have accounted for over 30% of the total gains! That’s not to be sneezed at.

I’ll be detailing much more after the blog’s reorganization… yes, I’ll be having a stock blog! Stay tuned.

Any stock stories to share?… do drop by!

This story has been edited three times for inappropriate formating, replacing/removing the chosen Flickr images (not properly licensed) and tidying up formatting.