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Drunk or sober, brokers are seeing billions of reasons to buy Citigroup

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Dear Mr. Berko:

I’ve been using the same broker for eight years and he has given me excellent advice — even though I think he’s an alcoholic. I gave him $65,000 in 1997 and told him that I only wanted to own high-quality dividend stocks and did not want to speculate. Well, my account is now worth $104,000 and I’m getting nearly $4,300 in dividends and interest.

In April 2003, he called and wanted me to buy 100 shares of Citigroup, but I wasn’t interested then. He recently called me again to tell me to buy Citigroup. Well, he sounded drunk on the phone and I did not buy it, probably for that reason. I don’t know if I should buy it now, because in the past two years it has moved up only four points. Please tell me what to do.

W.D., Indianapolis, Ind.

Dear W.D.:

Some brokers make better decisions when they’re drunk than when they’re sober, and perhaps that’s the reason for the success of your account. However, I don’t condone his drinking and I’m flabbergasted that his manager puts up with it. Still, I must give this guy his due because drunk or sober, he has a good analytical head attached to his cervical spine.

Citigroup Inc. (C-$47.37) under the stewardship of Sanford Weil (this guy is so multitalented that he can dream in his dreams) has been one of the most impressive and consistent performers in the financial services sector. Citigroup, one of the most profitable companies in the world, expects to book net profits exceeding $22 billion this year. The company owns Smith Barney, CitiFinancial, Primerica Financial Services, Banamex (one of the largest banks in Mexico), Associates First, Washington Mutual’s consumer finance unit, Sears’ credit card assets and a huge Visa/MasterCard portfolio, and has branches in every major city on the globe. And there’s more and more and more.

(Editor’s note: Citigroup bought Principal Residential Mortgage Inc. from Principal Financial Group Inc. one year ago.)

The brilliance of it all is that management puts it together as neatly and comfortably as a pair of good bedroom slippers. Over the years, Weil has assembled an array of classy businesses that offer almost every kind of financial product and provide these products all over the world.

Citigroup is a financial powerhouse with enormous political clout, $1.5 trillion in assets and $21 billion in net income (twice as much as Wal-Mart Stores Inc.) from $86 billion in revenues. And in the past seven years, C’s assets have doubled, loan growth has tripled, revenues have doubled, net income has tripled, return on assets has increased 35 percent and book value has grown threefold to $21 a share. Best of all, the dividend growth zoomed from a niggardly 9 cents a share in 1998 to $1.76 last year, and the Street believes Citigroup will continue to be generous with its dividend increases. Quite splendid indeed!

Though for personal reasons I’m not fond of Weil, I admire his genius, which has created a financial powerhouse more influential and bigger than anything this world has ever seen. This guy knows how to run a bank, and he has the energy as well as the people skills to make Citigroup a continuing success.

Now though your broker might enjoy a four-martini lunch, it certainly has not affected his decision-making capabilities. Citigroup is recommended by Morningstar, Standard & Poor’s, Bear Stearns, Prudential, A.G. Edwards, UBS Securities, Value Line, Morgan Stanley, S.G. Cowan, Goldman Sachs and other Wall Street luminaries.

The consensus is that the stock should be worth between $75 and $85 a share in the coming three to four years. I like that number, and drunk or sober I’d buy the stock in a heartbeat. In fact, many of our managed accounts own shares of Citigroup. But I must tell you that I often envy people who drink because they know what to blame their mistakes on.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.

© Copley News Service