For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.
"In a perverse twist of irony, more adventurous investors could choose Citigroup (NYSE: C), which is my speculative favorite for 2008," says Keith Fitz-Gerald, editor of Money Morning.
"I recognize that you might be thinking that I've completely lost my mind. But I believe this is an opportunity to buy into one of the world's fastest growing and best run financial companies at a bargain basement price.
"First, what's causing Citi's current angst is related to a breakdown of risk management -- not the deterioration of operations. The company remains globally diversified, and many portions of its business still reflect double-digit growth rates, particularly when it comes to China and Eastern Europe.
"In my view, Citi is now trading for a pittance. In fact, it's just barely seven times earnings and eight times 2008 earnings. Yet if you add up the growth prospects and current valuations, the company reflects a value that could be as high as $60 or more a share.
"Meanwhile, Citi's largest shareholder, Saudi Prince Alwaleed bin Talal, is keeping his shares, but he's rumored to be angling for more. And value managers, such as noted bargain hunter William Smith of SAM Advisors, is actively buying shares.
"It all comes down to cash flow, and in this case, Citi's valuations have been pummeled at a time when the underlying cash flow really hasn't changed all that much.
"One caution though, there's a lot of conjecture that Citi may have to break itself up or cut its dividend. Certainly those are valid risks. So are possible downgrades and negative comments from gun-shy ratings agencies that were caught flat-footed by the credit crisis -- just like they were in 2000 when the dot.bombs blew up.
"Any of these things will take a while to work through the system, and Citi's share price will be volatile. In fact, I'm betting on it -- and so are other seasoned pros like the ones I just mentioned. And therein lies the opportunity."
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