1. Citigroup Inc. (NYSE:C)
Forward Price-to-Earnings Ratio: 8.77
Number of Hedge Fund holders as of Q2: 85
Citigroup Inc. (NYSE:C) is one of the bank stocks trading at a discount while undergoing a restructuring that promises to position the company to generate significant long-term value. Despite its size and scope, Citigroup has yet to keep up with its bigger competitors, with $1.7 trillion in assets.
Its massive global business has turned out to be a big headwind, making it difficult to generate significant value. Nevertheless, the bank has embarked on a restructuring drive that has sold 9 of 14 consumer franchises.
The bank reduced managerial layers from 13 to eight, eliminated 60 committees, and plans to shed thousands of positions as it aims to trim its operational expenditure. The bank also plans to take its Mexico consumer business public as part of its push to generate shareholder value.
Citigroup Inc. (NYSE:C) can move closer to its return on equity goals, which Chief Executive Officer Jane Fraser thinks should be between 11% and 12%. The stock would definitely see a significant rerating if that occurred. If the stock performed similarly to its peers, such as Bank of America and Wells Fargo, it would almost double in value.
Amid the restructuring drive, it delivered solid second-quarter results that beat estimates. Net income was up 10% year over year to $3.22 billion as revenue rose 4% to $20.14, affirming why it is one of the best dirt cheap stocks to invest in now on strong underlying fundamentals.
As the restructuring drive takes shape, Citigroup Inc. (NYSE:C) trades at a significant discount of 45% of its book value. It trades at a price-to-earnings of 8.77 compared to the S&P 500 average of 27.45.
In Q2 2024, 85 hedge funds held positions in the stock, with total stakes reaching $10.64 billion. As of June 30, Berkshire Hathaway was the largest shareholder with a position worth $3.51 billion.
Patient Capital Management stated the following regarding Citigroup Inc. (NYSE:C) in its first quarter 2024 investor letter:
“Citigroup Inc. (NYSE:C) gained 24.1% in the quarter continuing its uptrend from 4Q. The company is on a multi-year journey to reorganize the business and reach a return on tangible common equity of 11-12% by 2026 (and higher further out). Citigroup is finally taking the hard actions necessary, cutting unprofitable departments, taking out middle management layers, and reducing overall headcount. As of early March, the company was 70% done with its business exits and had reduced management layers by 1/4th. We have high confidence Citi will hit its targets. In the meantime, the company is returning cash to shareholders, which could meaningfully increase if the Basel III capital proposal is changed.”
As we acknowledge the growth potential of Citigroup Inc. (NYSE:C), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than C but that trades at less than 5 times its earnings check out our report about the cheapest AI stock.
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