Diamonds and Dogs

1/14/19

Citigroup (C) leading the financial sector higher following earnings. Citigroup is up 4% to a one month high even though earnings were less than stellar in the fourth quarter.  Citigroup actually missed sales estimates due to a decline in the Fixed Income business. The good news is investors are looking past the bad news in the quarter. Citigroup sees the economy remaining strong, noting similar fears about the economy in 2011 and 2016 which never materialized. Mike Mayo upgraded Citigroup to Outperform saying there are no 'bogeyman' coming for the banks and the big banks are benefiting from scale like never before.

Western Digital (WDC) taking a hit on a downgrade. Western Digital is down 5% today and down over 60% since March due to slowing cyclical demand. The analyst said the $2 a share dividend may not be sustainable with only $2.35 a share in free cash flow and $11 billion in gross debt. Maybe Western Digital shouldn't have announced that multi-billion dollar buy back last summer when the stock was 50% higher.