Dear Mr. Berko:

In January 2004, you recommended that I buy 100 shares of Citigroup, and I did at $51. Well, the darn stock is still $51, even though the Dow Jones average has risen from 11,000 to 12,700. Why hasn’t this stock taken off like it did between 1998 and 2003? The dividend growth has been phenomenal, and revenues as well as earnings have been setting records every year. Citigroup is the most profitable bank in the world, and I think it’s also the biggest. In fact, I think I should take $10,000 from my money market account and buy 200 more shares.

C.L., Jonesboro, Ark.

Dear C.L.:

Yes, I recall that Citigroup recommendation, and the stock has been dead as a dud ever since. It seems that my approval was the kiss of death. Mea culpa!

Citigroup Inc. (C-$54.91) during the last 12 months has traded between $46 and $57 a share. The financial services company owns Smith Barney, CitiFinancial, Primerica Financial Services and Bank of Mexico. In 2005, it sold Travelers Property & Casualty.

Citigroup, an aggressive powerhouse built by Sandy Weill, lost panache in late 2003 when Weill retired.

I first met Sandy Weill in 1972. I didn’t like him then, and I don’t like him now, but I respect his genius, energy, foresight, timing, hands-on management and ability to select the best person for a specific job. Weill is the reason C’s stock price grew nearly fourfold between 1998 and 2003. The current CEO, Charles O. Prince, is a swell fellow but lacks the Weill charisma, just as Jeff Immelt, now the CEO of GE, lacks the Welch charisma.

Citigroup’s earnings have doubled since Weill left. Assets have increased 75 percent. Loans increased 80 percent and the dividend has doubled to $2.16. But the stock price moves like it’s walking underwater.

I believe C’s revenues, earnings, dividends and deposits will continue to do well over the coming years. But the stock lacks the charm, excitement and gusto that were part of Weill’s reign.

C’s return on assets zoomed from 0.9 percent in 1998 to 1.41 percent as Weill was returning his key to the executive toilet. Under the distant management style of Prince, C’s return on assets collapsed to 0.95 percent this year and, according to Value Line, perhaps to 0.8 percent by 2009-10. This may be the source of C’s lousy stock performance.

To strengthen its return on assets, Citigroup may go on a hiring freeze and not replace most of the 30,000 to 50,000 employees who leave the company each year.

Even though the $2.16 dividend yields 3.9 percent, and I think it will be raised again this year, perhaps touching $2.80 by 2010, I doubt C has much upside potential. And even though revenues, earnings and assets may have compelling growth, I doubt the capital gains potential for Citigroup shares is attractive.

Citigroup plans to buy an online bank in the United Kingdom, a financial services firm in Central America and an 86 percent interest in a Chinese bank. Yet the Street seems to lack enthusiasm for Citigroup’s share price over the next few years.

Citigroup is a fine company with lots of meat but no sizzle. The same could be said of hugely successful companies like General Electric, Dell Inc., Wal-Mart Stores Inc., Microsoft Corp. and Intel Corp. Sometimes a company becomes so bloody big (only Exxon Mobil Corp. made more money in 2006 than Citigroup), its size weighs down the stock.

Keep the 100 shares you bought at $51 in January 2004 and keep that $10,000 in your money market account. Something better will come along when you least expect it.

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