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2008 Stock Pick...

Tuesday, January 8, 2008 | Jason Jovine

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This will be short and sweet, folks.  I think that by year's end, you will thank me.

I do not limit myself when I am investing and/or trading, and neither should you.  There should be no restrictions on what you buy as long as you understand what it is.

For example, some people just buy stocks or options.  I disagree with limiting yourself in this way.

My philosophy is that you should be familiar and comfortable with all the different types of investments because they all serve different purposes and come in handy at different times.

If you were, say, putting together a table, you wouldn’t just have a hammer, would you?

My point is that you have to understand that each type of investment represents a different tool in your investment tool box, so to speak, to help to accomplish your financial goals.

You should become familiar with stocks, options, bonds, and ETFs (Exchange Traded Funds) at the very least.

Stocks:  Stocks, as you know or should know, represent ownership in the underlying company.  In other words, when you buy a stock you become an owner of that company.  You can make money from stocks in two ways.  First are the dividends that the company may pay out, and second is the price appreciation of the stock.

Options:  Options are also called derivatives because they derive their value from what the option contract is based on.  In other words, if you buy a call option on XYZ stock, the call option will go higher if the underlying stock goes higher.  It “derives” its value from the underlying stock.

Bonds:  When you buy a bond, you are, in essence, making a loan to the entity that issued the bond.  The entity that issued the bond could have been a business or the government.  You make money with bonds from coupon payments and price appreciation.

ETFs (Exchange Traded Funds):  Obviously, these investments have become popular over the last several years, and I think that they are absolutely terrific.  ETFs can be used as a proxy for bonds, commodities and other assert classes and indices without the expense of a mutual fund.  They also trade like stocks.

Money strategy now for busy people…

Here is a strategy that I want you to employ right now that I believe will make you between 40% and 50% by year's end.

I want you to buy Citigroup here.  The symbol is C and it trades on the NYSE.  The price when you read this article should be just over $28 per share.

I have not recommended a stock in a very long time.  Every single stock that I have recommended in the past has gone higher.  I believe that this one will not be any different.

I know what is going on in the economy and the stock market (e.g. the mortgage meltdown).  I know that oil is about $100 a barrel, the unemployment rate is 5%, and what is going on internally with Citigroup, but I believe that at $28 or $29 per share, it is a good long-term buy.

They are paying a dividend yield of just under 8%.  If you buy the stock and simply wait for the price to appreciate, you will receive this nice dividend while you are waiting.  If you are not 100% convinced with regard to Citigroup, you can buy put options on your position as insurance.

My price target on C is $40 by year's end.  This is not counting the dividend yield that you receive.

This is a great way to start the New Year.

Happy New Year!

Until the next time, spend your hard-earned money wisely.

(Please let us know what you think about Jason Jovine's article.)
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Jason Jovine
Contributing Editor
The Tycoon Report




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30 Comments

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  1. David F (29 weeks ago) Is this Spam?

    Jason,



    C has raised approximately $40 billion via issuing more shares since this article appeared, thereby diluting existing shareholders' equity. Given this development, what is your current long-term projection?

  2. Tom (1 year ago) Is this Spam?

    I have faith in Jason. He is usually correct. The key issue here is TIME. He is stating that C will be up by the end of the year. I have no reason to doubt that. What I doubt is the short term performance. I've followed the wisdom of Chris Rowe that states that you're better of "riding the trend" and playing both sides. I shorted this stock using options on Tuesday after reading Jason's article and am up over 70%. I'm going to follow the trend on this on. I'll be looking for the uptrend and buy the calls when it moves in that direction also.

  3. Frank (1 year ago) Is this Spam?

    C is World wide. A regional problem anywhere

    will not take them down. The other financials

    are only regional. They went down. Think about

    that fact. I bought at 28.00 . I will hold

    I will also buy other things also.

    I wish I had a crystal ball.

  4. saroj (1 year ago) Is this Spam?

    I liked the clear language of this article. The recommended stock is clearly spelled out, and the reason for the recommendation is also very clear.

    I dont like when I have read the whole article, and still have not figured out what is the author trying to tell?

  5. Sharon (1 year ago) Is this Spam?

    Hello Jason,



    A good article with food for thought. Citi is on my watchlist.



    Today, 1/9/08, it closed at 27.49, up 1.3%, however, internals say bear down trend with a strength of negative 21. Dividend remains at just under 8%. Book price is 1.11, way over valued. Prefer to wait for confirmation on a buy.



    Best,

    Sharon

  6. Steve (1 year ago) Is this Spam?

    How can you seriously recommend a stock that has been in a free fall since July and has fallen over 8% in the past week? Not only is the housing crisis still looming with record defaults on mortgages, but more than likely people will now be defaulting on their credit cards as well. AT&T just announced a foreseen slowdown in consumer sales and the general stock market has seen one of its worst starts to the new year in a long time. I for one think that Citigroup has a ways to go before it reaches bottom. Standing at 26.77 now, I would not be surprised to see it go as low as $22.00 or even lower if the economy continues to report negative financials. Citigroup is sitting right around book value right now. But if consumer debt continues to increase and Citigroup experiences larger defaults on that debt, they will continue to go lower. Never try to catch a falling knife. Especially in a company that is in an industry with known problems as Citigroup clearly is. I would not buy this stock until a clear bottom is seen, and even then, only after there was a clear sign that the defaults on loans are going down.

  7. Ken (1 year ago) Is this Spam?

    When I started reading this article yesterday I really expected something more.

    Stocks, Options, Bonds, and ETF's. Is this your limit when you talk about not restricting your investment choices?

    I was hopeing you would include Commodities and Currencies. Unlike Options and ETF's, which can be used in conjuntion with any of the above, Commodities and Currencies are primary core investment vehicles that can offer us access to anouther market that does not run in tandem with the domestic stock market.

    ETF's simply have the power to give us easy access to these markets, as well as various international markets. While Options are just a trading vehicle, and are only about leverage and strategy in the above markets.



    As far as C is concerned, its a pretty foolish idea to buy something that is still committed to falling, no matter what the percieved value is. Value is a fine criteria for analysis, but there is no need to buy it. We are talking about investments, buying $1.00 for .05 is only worthwhile if it reverts back to its original value, in a reasonable amount of time. There is no need to jump the gun and try to buy an investment on percieved value. We make our money by capturing price movement, and to a lesser degree by harvesting dividends. Not by buying and holding falling value! Unless you think the potential dividends, and possible income from writing call options, can offset the incurring losses to such a degree that you accually show a profit from it, isnt it a lot better to wait and watch and be patient, untill you see the price bottom and start to move back up. I generally buy something now because it is something I need now, such as an investment that is moving in the right direction, or an item that I need or must have now at this price. Investments are simply not must have items. They have a purpose, and unless that purpose is fulfilled, without undue risk or excessive time, they are a misstake.

  8. dan (1 year ago) Is this Spam?

    Don't buy a "falling knife" stock, that is one of the key rules of investing that you are violating. You should only try and catch the bottom if you are sure there will be no more bad news from mortgages AND DERIVATIVES. $880 Gold warns us all to STAY AWAY FROM Citigroup

  9. John M (1 year ago) Is this Spam?

    Oh and just a some 2 cents to add. reports say that citi sent a letter to share holders yesterday saying the company may be forced to write down an additional $16 billion in the forth quarter. Merrill lynch almost doubled their estimate for Citi losses from 73 cents per share to $1.43 a share.



    Just doesn't seem like the right environment for a purchase of C

  10. John M (1 year ago) Is this Spam?

    Citi-group remains the only bank left being sued by Enron for a total of $21 billion dollars. Aftre Enron's collapse 11 banks were sued for helping Enron hide the extent of their financial troubles.



    10 banks settle out of court for $1.76 Billion. Citi-group has refused to settle and is facing the suit in court. It is safe to say if they loose the stock will take a substantial hit.



    If they have such a good case why did 10 other companies settle leaving Citi to fight the case on it's own.



    Best-a-luck with Citi.

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