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Did Citi Just Become A Must-Have Stock?

Tuesday, 7 Dec 2010 | 6:20 PM ET

The Fast Money desk suggests keeping a close eye on Citigroup after the Treasury said late Monday that it had sold its 2.4 billion Citigroup shares at $4.35 each, finally unwinding a stake that in April amounted to 27 percent of the bank.

The sale closed a long and difficult chapter for Citigroup, which took $45 billion in three government bailouts during the financial crisis. The bank has returned to profitability this year but has struggled to rebuild its reputation under the stigma of being a government ward.

"To finally get that albatross off from around its neck, it's a great thing," says Alan Villalon, a senior banking analyst at Minneapolis-based First American Funds, which owns Citigroup shares. "Now the concerns that the government is influencing business decisions can be gone," he adds

This may clear the way for Citi to be added to benchmarks, says host Melissa Lee and there could be a chase. According to Jeff Harte, in the third quarter 48.4% of Citi shares were owned by institutions. If all 2.4 billion shares were sold to institutions it would still be under-owned as compared to peers.

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Citi Ownership: Institutional Holdings
Q3' 2010 - 48.4%
After Govt Sale, if 2.4b sold to Institutions: 56.5%
Peers 73.9%
Source: Sandler O'Neill

Meanwhile, according to a Reuters report, Credit Suisse estimated that portfolios following the S&P may need to buy up to 375 million Citigroup shares, although the timing of the purchases was uncertain.

What’s the trade?

I’d go long, says Joe Terranova, but with a stop at $4.50.

Because many institutions won’t acquire stocks that trade under $5, it wouldn’t surprise me to see a reverse split, adds Anthony Scaramucci.

I sold out of my position in Citi, says Brian Kelly. But it’s largely because I think the market wants to pullback.


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Trader disclosure: On December 7th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour Owns (AAPL), (BAC), (BX), (CSCO), (GE); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Terranova Owns (C), (GS), (NKE), (OXY), (PEP), (PFE), (VRTS), (UPL)

For Anthony Scaramucci
Scaramucci and SkyBridge Capital own (BAC)
Scaramucci and SkyBridge Capital own (C)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
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For Brian Kelly
Accounts Managed By Kanundrum Capital Own (DRYS) calls
Accounts Managed By Kanundrum Capital Own (WFC)
Accounts Managed By Kanundrum Capital Own (DE) call spread
Accounts Managed By Kanundrum Capital Own (MON)
Accounts Managed By Kanundrum Capital Own (TBT)
Accounts Managed By Kanundrum Capital Own (GDXJ) calls
Accounts Managed By Kanundrum Capital Own (BG) calls
Accounts Managed By Kanundrum Capital Own (AAPL)
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For Scott Nations
Nations is long (TBT)

For Nick Calamos
Calamos Investments Mutual Funds Own (ORCL)
Calamos Investments Mutual Funds Own (ALTR)
Calamos Investments Mutual Funds Own Autonomy
Calamos Investments Owns (ALTR) Calls

For Peter Boockvar
***No Disclosures***

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