We recently published a list of the 10 Best Stock Picks of Billionaire Leon Cooperman in 2024. Since Citigroup Inc (NYSE:C) ranks 3rd on the list, it deserves a deeper look.
Billionaire Leon Cooperman predicted in April that the US is headed for a financial crisis. Cooperman said that the Federal Reserve kept interest rates near zero, but raised them dramatically in a period of 12 months. The Omega Family Office chairman and CEO expects “one or two” rate cuts this year. He emphasized that the market remains overvalued.
In February last year, the billionaire said that the market was headed for a recession, and noted that the S&P 500 high of about 4,800 recorded in 2022 could “stand for some time.” In July 2022, while talking to Bloomberg, Cooperman said that he was “shocked” that interest rates were so low.
“I am of the view that equities are the best house in the financial asset in the neighborhood, but I don’t like the neighborhood, for a lot of reasons.”
Cooperman in the Bloomberg interview in 2022 had categorically said that sooner or later the strong dollar, prices of oil and the Fed would “lead us into a recession.” He went on to add that recession would be a “2023 event” and predicted that the market would bottom somewhere near 35% to 45% below its peak of 4800.
The billionaire had said that he would be “very surprised” if we were to see another bull market anytime soon, given his view that we’ve had one of the biggest bull runs driven by FAANG, SPACs and speculation. The AI revolution that started in 2023 was indeed a shocker for Cooperman as his recession predictions were proven wrong.
For this article we scanned billionaire Leon Cooperman’s Q1 portfolio and picked 10 stocks with the highest number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 87
Leon Cooperman’s stake in Citigroup Inc. (NYSE:C) is small (worth about $18 million) when compared to other major stocks in his portfolio. However, based on hedge fund sentiment, Citigroup Inc. (NYSE:C) ranks third in our list of the best stocks to buy according to Leon Cooperman in 2024. A total of 87 funds in the database of Insider Monkey reported owning stakes in Citigroup Inc. (NYSE:C) as of the end of 2023. Citigroup Inc. (NYSE:C) shares have gained about 37% over the past one year. The biggest hedge fund stakeholder of Citigroup Inc. (NYSE:C) as of March this year is Warren Buffett’s Berkshire Hathaway, which owns a massive $3.5 billion stake in the company.
Silver Beech Capital mentioned Citigroup Inc. (NYSE:C) in its first quarter 2024 investor letter. Here is what the firm said:
“Since the beginning of 2023, Citigroup Inc. (NYSE:C) has been one of the Fund’s largest holdings. In our Q3 2023 investor letter, we laid out our core investment thesis for Citi: although the bank was an underperformer (weak returns on equity), Citi was (1) less risky than it had ever been and (2) cheaper than it had ever been. The Fund’s investment thesis for Citi featured in a November 2023 Euromoney article Citi 2.0: If she builds it, will they come?
The market narrative has started to converge on our investment thesis. During the first quarter, Citi was the best-performing bank stock in the S&P 500 index. However, improvements in Citi’s operating performance have come more slowly than its share price gains. Due to this converging market perception with our own thesis, the Fund exited its position in Citi. The Fund’s stake in Citi generated a 34% gross IRR over our 14-month investment period.”
Warren Buffett, Leon Cooperman, Ken Fisher, Cliff Asness, Israel Englander – the list of billionaires having stakes in Citigroup Inc (NYSE:C) is long, thanks to Citigroup Inc’s (NYSE:C) strong fundamentals and dividend history. Citigroup Inc (NYSE:C) has upped its dividend every year since 2011. Citigroup Inc (NYSE:C) expects annual revenue growth of about 4%-5% by 2026, and it’s targeting an 11-12% return on tangible common equity in the same period.
Analysts at BofA expect Citi to clock in EPS growth of 8% this year. According to Yahoo Finance data, Citigroup Inc’s (NYSE:C) EPS estimate for the next year (2025) is around $7.21. Assuming the banking sector’s average multiple of 10.32, the stock is currently undervalued. Wall Street’s average analyst estimate for Citigroup Inc (NYSE:C) is $66, while the stock was trading at around $62 as of June 1.
Overall, Citigroup Inc (NYSE:C) ranks 3rd on Insider Monkey’s list titled 10 Best Stock Picks of Billionaire Leon Cooperman in 2024. While we acknowledge the potential of Citigroup Inc (NYSE:C), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Citigroup Inc (NYSE:C) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.