Is Citigroup (C) the Most Undervalued S&P 500 Stock to Buy Now?

Insider Monkey
Yesterday

We recently published a list of 10 Most Undervalued S&P 500 Stocks to Buy Now. In this article, we are going to take a look at where $Citigroup Inc(C-N)$. (NYSE:C) stands against other undervalued S&P 500 stocks to buy now.

Earlier on March 13, Michael Cuggino, President and Portfolio Manager of the Permanent Portfolio Family of Funds, appeared on CNBC’s ‘The Exchange’ and began discussing his fund’s performance. Despite a challenging market environment, his fund achieved a 4% return this year, which he attributed to diversification rather than reliance on a single asset class like gold. The portfolio includes gold, silver, diversified equities, and bonds. When asked about market reactions to tariff-related headlines, Cuggino emphasized the importance of not overreacting to daily news fluctuations. He described the market’s behavior as herky-jerky and advised investors to focus on long-term opportunities rather than reacting impulsively. His base case anticipated some turbulence due to the transition under the new administration’s economic policies. His strategy involves identifying opportunities during volatile periods rather than making significant portfolio changes.

The discussion also featured David Zervos, Chief Market Strategist at Jefferies, who provided insights on Washington’s role in market volatility. Zervos acknowledged that while policies such as tariffs, immigration reforms, and drug policies were largely unfolding as expected, the speed of changes under the current administration was surprising investors. He pointed out rapid spending cuts and layoffs in the public sector as key contributors to market unease. For instance, courts recently ordered the federal government to rehire probationary employees who had been dismissed. Zervos likened this abrupt shift to transitioning from a public-sector-reliant economy to one driven by the private sector, which is a process that has introduced significant uncertainty. Regarding tariffs specifically, Zervos downplayed their overall impact on the US economy, which he described as domestically driven. While tariffs could affect specific industries like wine or automobiles with high overseas components, he argued that broader economic trends would be shaped by deregulation, reduced business costs, and a shift toward private-sector efficiency. He warned that the speed of these transitions could lead to short-term volatility but maintained optimism about long-term productivity gains.

Methodology

We used the Finviz stock screener to compile a list of the top S&P 500 stocks that had a forward P/E ratio under 15. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 1000 elite money managers.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A business owner discussing commercial business loans with a bank representative.

Citigroup Inc. (NYSE:C)

Forward P/E Ratio as of March 14: 8.9

Number of Hedge Fund Holders: 101

Citigroup Inc. (NYSE:C) is a financial services company that provides diverse products and services across five segments. These include the Services, Markets, Banking, US Personal Banking, and Wealth segments. It serves consumers, corporations, governments, and institutions worldwide.

The company’s Services division saw a 9% year-over-year revenue increase in 2024, and reached $19.6 billion. This was driven by a 17% rise in fee revenue and higher deposit volumes. The division gained market share in Trade and Treasury Solutions (TTS) and security services, and achieved its best Q4  in 10 years with 6% market growth. For 2025, the company anticipates continued growth in non-interest revenue through expanded institutional and commercial client relationships and digital/data investments with asset managers.

Citigroup Inc. (NYSE:C) is expanding its Flex Pay “pay-over-time” tool through strategic partnerships, notably with Apple Pay, to increase customer awareness and usage. Flex Pay allows credit card customers to convert purchases of $75 or more into fixed monthly payments for a fee, instead of APR. Primarily used by digitally savvy customers for short-term financing, Flex Pay has seen consistent double-digit growth, which includes a 25% increase from 2023 to 2024. While accessible via the company’s app and website, partnerships drive significant volume and offer added convenience.

Diamond Hill Capital Long-Short Fund stated the following regarding Citigroup Inc. (NYSE:C) in its first quarter 2024 investor letter:

“Other top Q1 contributors included Meta Platforms, Citigroup Inc. (NYSE:C) and Walt Disney. Banking and financial services company Citigroup’s restructuring efforts are ongoing, and it continues remediating regulatory issues and building capital in anticipation of increased requirements. The company expects to see expenses fall meaningfully in the second half of 2024, bolstering the outlook from here.”

Overall, C ranks 4th on our list of the most undervalued S&P 500 stocks to buy now. While we acknowledge the growth potential of C as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than C but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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