Well that pretty much covers it doesn't it?
The richest man I ever knew used to ask three questions:
"What's the upside?; what's the downside? what's the time frame?"
He wasn't big on "Investment theses" or rationales.
Just be right or, if you're wrong, be honest.
And always, always cut your losses.
From The Motley Fool:
A SWOT analysis -- a look at strengths, weaknesses, opportunities, and threats -- is a good way to evaluate a company's business operations. Citigroup (NYSE: C), the baron of the big bank bailout brigade, was one of the firms at the center of the U.S. financial crisis. Lately, there have been signs of improvement at the big bank and we'll put it under the SWOT spotlight for a closer look.
- Six consecutive quarters of beating or matching earnings estimates; profitable for the last two. Two quarters hardly proves a turnaround, but it has to start somewhere.
- Credit losses declining for four consecutive quarters.
- Mortgage and credit card delinquencies starting to decline.
- Tier 1 Capital ratio of 12% is well above the regulatory threshold.
- Trading below tangible book value while peers JPMorgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), and Wells Fargo (NYSE: WFC) all trade at a premium to tangible book value.
- Loan loss reserves are being drawn down. If improvements in loan delinquencies continue, no problem. However, reducing loss reserves leaves less cushion to deal with the possibility of a double dip.
- Citigroup reports it has more than $1.9 trillion in assets on its balance sheet. Improving loan quality is great, but if the economy goes back to recession or unemployment doesn't improve, no one knows whether those loans will go sour.
- Low Fed rates set up easy money by borrowing short and buying Treasuries or other secure debt.
- A global footprint lets Citigroup go after opportunities wherever they are. Over $1 billion of Citigroup's consumer banking profit last quarter came from outside the U.S.
Citigroup still has a lot of rebuilding work and there are potential stumbling blocks in the way, but the lights in the big Citi are starting to shine....COMMENTS
- The easy money policy at the Fed will change at some point. I don't know when, but Fed rates have only one direction to go.
- Recently passed financial reform legislation may crimp some banking operations or impose additional costs on banks.
- The U.S. Treasury still has a substantial ownership stake. Treasury is selling and has stated it has no intentions of directing bank policy, but situations could change. Treasury sales could put downward pressure on the share price.