C

Citigroup trading under 7P/E. 4% div. Rising intrest rates = larger bank profits

800 @ 48.40ea

ya it looks ok - Could retrace to those lows again as I expect the market to roll over

Lots of better stocks imo that are really destroyed like BABA or NIO around $5 but I could see a bull case for C

Are you sure rising interest rates = larger profits?

All the lending companies I know of are letting people go left and right because very few people are going to sell their house with a mortgage at 3.5% to buy one at 7%. There are also ZERO refi's going on because nobody refi's to a higher rate obviously.

Also higher rates make lending more attractive to private equity. I myself have recently gotten involved in real estate debt. Could be stealing business from the banks.

My long term play is UHALB. They are just now showing they want to do something about the stock price. They have always focused solely on running the company the best they could and didn't worry about stock price. They are a cash cow and have a growing self storage business. It seems to be priced as only a self moving business. They trade at a PE of 10 while other self storage trade at PE 25-30. They recently did a 10-1 split and introduced a regular dividend. The lack of dividend I believe is why the stock has been at a bargain price for so long. If they start to increase the dividend at a nice rate, which they can because they print cash, the stock should do amazing things over the coming years.

Financials benefit from higher rates through increased profit margins.

So if new mortgages are down 90% and refi's are down 100%, they are still going to make more on the very few loans they gave?

Nothing like a recession and defaults on loans to boost bank profits.

"Long-term" implies that short-term considerations are not fundamental to the thesis. Presumably recessions and rising rates will not be a permanent fixture of the economy.

The rising rates benefit the banks Net Interest Margin and Net interest Income. The spread between the interest amount the bank receives on deposits vs the amount they pay interest to their customers widens. The higher the Fed hikes, the bigger this spread widens.

It’s not all about mortgages, which typically get sold off and not serviced for their term.

But the curve is inverse right ?
Aren’t bank borrowing low short interest rates and lend at longer higher interest rates to make money ?

It is a bit more complicated than that. We use a fractional reserve* system, so they do not carry reserves equal to the loans they have made, which saves them quite a bit. They also get a portion of their reserves from checking/savings/CDs which are not paying out more than long-term loan rates that they offer.

*Basically, they need to have $1 to lend $10.

My point was I’m not sure they make money because the rates are moving up, when the curves are inverted .
I might be wrong .

I got your point. That is why I made my point. My point is related to your point in that it shows that inverted rate curves do not keep them from making money.

Still holding. Up $15k on this stock, bought in at some points around $40 and $44 as well.

1150 shares

No one cares. Your analysis is such simplistic garbage that your posts in this thread read like a farce. You would have been up more with way less risk just holding spx. "High interest rates are good for banks!" If only the analysts at billion-dollar hedge funds had that kind of alpha-generating insight. But they always get hung up on dumb stuff like rising rates destroying the banks' bond portfolios, and the inverted curve causing deposits to cost more than banks earn on those bond portfolios, and depositors withdrawing their funds from places like Citi to park their cash in MMFs while Citi has no asset management division anymore, and cap rates mooning on the commercial properties that banks own because rates have risen and WFH has lowered demand. If only these analysts at Goldman had the clarity of your wisdom that, "You see, banks make money when interest rates go up."

https://www.wsj.com/articles/how-ban...se-11639650602

Convinced me to sell it all. It hit $57 I will look for value elsewhere. PE ratio now at 14 and dividend rate under 4.
Final profit was $16k or $17k with the dividends.


Need some suggestions. I have a little invested in Nutrien and Medtronic and a whole bunch of cash in CDs with rates above 5%.

Large banks are hideously complicated businesses and you obviously have no idea what goes on under the hood.

few things
- banks 'borrow short, lend long' google that, its not so simple as rates going up = good
- C has crushed earnings for over 10 years, something like $140 billion in bottom line earnings (more than its current market cap ffs), but if you looked at the stock chart of that period it looks awful. why is that?
- Why does C trade at ~1/2 its book value? Thats the key valuation metric for banks, not PE or fkn dividends. JPM is ~1.7, BAC and WFC ~1. The market says the banks assets(loans) are trash, why?


Also this x1000, especially when you don't even do the most basic homework

The good news is you can perform better and do no homework, by owning SPY and going about your day

Price to book was always ridiculously low and thus the reason it was a good value. PE is historically something that will drive price. As the banks float closer to 12 PE, in my lifetime they tend to come back down to earth. Below 8 and eventully they seem to go up. It was at like .6 or .5 price to book or something ridiculous when I bought it. If I had bought SPY it would have been close to the same payout. Slightly less because of the dividend C paid compared to SPY. Over 6 years I have a rate of return on my accounts of 11% per year so luckily I have beaten the market slightly. The best part is most of it was in my Roth IRA where im up 13%+ per year in 6 years holding no more than 4 stocks at a time.

The market is telling you the loans are sht as Citi lends to subprime people way more than other banks. When/if those loans start to go bad, the bank takes on huge losses, and thats the risk you are taking. But you obviously wouldn't know that.

Cheap valuations are cheap for a reason.

I cant emphasize enough that you are just punting, but obviously its your own money. In 10-20+ years when you have alot less net worth than you would have in SPY, you only have yourself to blame.

Not many market outperformers exist who cant answer the basic question of their picks, "what does the company do"?

Dont be this guy - https://www.youtube.com/watch?v=E_YIZyVzymA

I already said the stock was sold at $57. All of it. How can I punt when its not even in anything? My Roth got a jumpstart not being in SPY and over 6 years im up almost 100%. Time can’t go backwards, so if you want to talk about less net worth, then you have to include how I currently have more net worth than if I had SPY. So im going to have to lose at a rate pretty bad before Im even at a break even point as if Id always had SPY. Or are you one of those guys who only understands how to slam people who may not have the greatest strategy, but still a strategy with slightly more risk and have a decent track record with. Like everything you are bashing right now, im up money. Most of my strategy is from the Graham book on value investing with some of the Peter Lynch value stock picking also thrown in. In like 6 years ive picked about 20 stocks. I have one dud out of 20 and Im still holding it, because I don’t know why? Nutrien. So I must at least be good at selecting stocks with little risk of ruin. And like I said I got most of my money sitting in 5.4% CDs, so maybe that is my actual punt not having that in SPY.

Sorry if I was too harsh, but I hate to see people punt away their future net worth.

Dont make the mistake of thinking you are some great stock picker, the results of a lot of trades are out of your control.

Take 3M for example, plenty of 2p2'ers in the past mentioned this as a potential buy and hold because of "good company" "good dividends" similar to what you are doing now, also with not knowing much of anything about the company. How has that played out? Breakeven stock for 10 years including dividends, and taxable investors have to pay taxes on dividends obv.

If you pick 10-15 stocks to buy and hold, and one turns into a 3M, you under perform for the rest of your life.

The risk/reward on picking individual names is stacked against you. Your reward is the earnings of the individual names (small), the downside is a huge chunk of the share price (large). Buying broader ETFs keeps the reward part whilst eliminating a monster chunk of that downside stock specific risk. Yes this is boring, and it doesn't sell books or commercials on CNBC.

I wont post anymore on the topic, if this doesn't convince you then nothing will.

I appreciate the advice thank you.