Am not in the market and am not sophisticated in same.
However the low price of Citi looks like a money maker.
What do you guys with more financial knowledge think. Should I buy?
Am not in the market and am not sophisticated in same.
<Moved to IMHO.>
Oops! Sorry 'bout posting in wrong category.
The reason why the stock is at $5 is because people with a good deal of financial knowledge think that’s what it’s worth. There’s a good chance they’re right.
It is a gamble (any stock at that level is). It could pay off, but there’s also the chance you lose everything. If you can afford to lose the money, it might be worth the gamble, but don’t bet your life savings on it.
If you’re not in the stock market at all, I’d highly recommend getting something like an index fund instead. This lets you invest in a large basket of stocks, making it significantly less risky.
For example, VFINX, which tracks the S&P500 index, is currently at $74 per share, down from nearly $140 a year ago.
Not the type of question that’s easily answered generically.
How long do you plan to hold it? How much of it do you own already? How much of other similar bank stock to you own already? What is your investment style? What is your risk tolerence? How much do you have to work with? How much do you have in the market already? What is your debt/income ratio? What is your overall financial position right now? What is your liquidity status right now? What are your investment goals? What is your past investment experience? If it dropped to zero tomorrow would it kill you? If it doubled in value tomorrow what would you do with it? If it stayed at the exact same value for ten years would it kill you? How would you define a successful experience investing? Do you plan on doing a lot more trades this year or is this likely the only investment you make this year? Etc. etc. etc. etc. etc. etc. etc.
I know you wanted more of a direct answer, but as a former Financial Advisor myself (retired), anyone who gives you investment advice without first asking many of the questions above is doing you a disservice and you’re bound to either be dissapointed or frustrated with the results. Either that or you get lucky but investing isn’t about luck. At least not anyone who’s serious about it, anyway.
You can also invest in leveraged ETFs, which magnify the gains and losses of the S&P. So if you think things are oversold right now, you can buy SSO or BGU. Then, if you’re right and the market jumps say 10%, you’ll make 20% or 30%. (Note that these are adjusted daily, which means that variance will reduce your long-term gains even if the S&P price ends up back where it started.) For pessimists, SDS or BGZ do the same thing, but in the other direction. I bought some SDS back when the S&P was around 950 which I sold…Tuesday. :smack:
Thanks guys, and fair questions shallora.
I don’t own any stocks, have a few bucks to spare
and can afford to loose $5k on an investment.
That’s real money, I know, but a lose would not kill me.
Hurt some, yes.
It’s the upside that inspires and intrigues me!
$50 a share just over a year ago, $5 a share now.
What are the chances it will rise above 15-20?
How does one ascertain a proper risk/benefit analysis
without being an MBA? Forget that last question, please.
I’m not looking to study for months or years on my O question.
Simply (?) is Citi a probable good-great buy now?
This is what is known as recency bias. Things have so fundamentally changed for financial firms since last year that the $50/share number is meaningless now. It’s hard to say what will happen. I could see it going up to $10/share. I could also see it hanging around $5/share for the next ten years. I could even see the government having to do some sort of extreme bailout which leaves shareholders high and dry.
If you think the financial sector is likely to recover, I’d look into sector specific ETFs. Putting everything on a single company is much more risky.
BTW, in the interest of full disclosure I invest mostly in mutual funds rather than individual stocks. I have a few individual stocks, but not many. However, if my tax situation should ever change, or my wealth situation, or my risk tolerence situation, I might open up more to individual equities, but after assessing my own goals and objectives I learned that personally, I am more of a mutual fund kind of guy. That said, I have maintained portfolios for individuals who own hundreds of stocks without any conflict of interest because their own personal investment goals and objectives were different from my own, and I agreed with them that stocks were the way to go . . . for them. Each individual is different, however.
In the final analysis putting the 5k on red or black in Vegas
would be what I was doing, I guess.
It’s just that the possible upside for such a giant company,
assuming the economy recovers, with an historic track record
would be worth the risk.
But, that is the question.
Well, if you have $5k that you want to spend on “big name companies with single-digit stock prices”, and you don’t want to do an index fund, build your own:
Buy 100 shares of Ford at $1.25 ($125)
100 shares of GM at $3.00 ($300)
100 shares of Yahoo at $9.00 ($900)
100 shares of Starbucks at $7.40 ($740)
100 shares of AIG at $1.65 ($165)
100 shares of Alcoa at $7.00 ($700)
100 shares of Citigroup at $5.00 ($500)
100 shares of Sprint/Nextel at $1.50 ($150)
100 shares of Motorola at $3.35 (335) 100 shares of E*Trade at .95 (95) 1000 shares of Idearc at .05 ($50)
100 shares of Time-Warner at $7.45 ($745)
That’ll take you to $4,805 and surely one or two of these companies will survive and thrive.
The market just closed, with Citigroup at $4.80. If you’d bought 1,000 shares when you posted the original question, you would have lost $200 by this afternoon.
I heard earlier today that Citigroup is nearing the level where mutual funds will have to sell it. That would drive the price down even more.
I’d echo the advice to go for mutual funds instead of a specific stock.
The fees of doing something like that would be substantial.
I think you have the right idea, but you need to do more analysis than it was high before therefore it will be again. Anyone who bought Lehman at 10% of the high, still lost that 10 percent. It is important to understand why Citi fell so much, and how much exposure they still have. The bet has a significant amount of upside, but it is a very dangerous bet.
I would also recommend against index funds. The biggest weakness of index funds are that they are slow to react to change, which can be costly when the market all over the place. Equities are good but I’d focus on finding a few that are artifically low due to the economic crisis, rather than ones that are causing the crisis.
Well, the above post was written a bit tongue in cheek. But if you’re going to spend $5k on one stock “just because it’s low”, better to spend that $5k on a diversified portfolio of stocks “just because they’re low”. You’ll have better odds of seeing that money again… someday.
JohnT and all,
“big name companies with single-digit stock prices”
Will do! If I’m gonna lose the money, diversification might be to my advantage.
Some banks give you free trades if you have over a certain amount of $$$ with them.
I started a thread some time ago about whether the common man has any business trading in the stock market.
Basing whether you should purchase a stock on how it is currently trading against it’s 52 week high or low is not a good strategy. It does not account for whatever circumstances led that stock to drop to the point it is now and does not take into account what changes will happen in the future.
To make a judgement on whether a stock is a good buy, you need to somehow value the stock against the current price it is trading at. There are a number of ways to do this (discounted cash flow analysis, P/E ratios, etc), however it helps if, as you say, you have an MBA as well as experience in the financial markets. There are a lot of inputs you can put into your analysis that are based on experience, gut feeling or what have you.
If you buy a stock just because you think it’s low, it’s akin to betting on black because the board shows red has rolled the past ten rolls and you think it’s “due”.
I put about $8 K in big name companies that are not experiencing specific financial troubles and are in industries that tend to be recession-proof. Companies like McDonalds, Proctor & Gamble, and a few others. I’m down about 10% or $800 in the past month. It’s not a ton of money and I’m in long term, but it’s still agrivating to see the market hasn’t bottomed out yet.
I would also avoid financial companies right now.
Well, it’s under four bucks a share now, if you’re still interested…
That damn little voice says, “buy, buy!”
Oh, what to do?
If you had bout 1000 shares at $5 a share when you first posted this thread, you would be down about $1200 dollars. And you don’t know if this stock is on it’s way to $2 or $1.
Citibank (NYSE:C) is currently trading at 1995 levels. How long are you willing to wait to make a profit from it? If you had waited 13 years, you wouldn’t have made anything.
Then again, most of the S&P is trading below fair market value. Chances are, many of those stocks will go up. I find the whole thing to be very frustrating.