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Inside Wall Street


The Citi Won't Be Sleeping Forever

It's no surprise that Citigroup (C) (C) is in the doghouse with most investors. The credit crunch and subprime meltdown sank its stock to 18 in mid-March, down from 55 in May, 2007. A number of influential analysts put a "sell" on Citi, including Meredith Whitney of Oppenheimer (OPY), William Tanona of Goldman Sachs (GS), and Michael Mayo of Deutsche Bank's (DB). But quite a few equally important Street pros recommend a buy: JPMorgan Chase (JPM) Vivek Juneja, Punk Ziegel's Richard Bove, and Lehman Brothers' (LEH) Jason Goldberg. And Tom Sowanick, chief investment officer of Clearbrook Financial, which owns shares, says Citi, now up to 23.57, "should hit 45 in 12 to 24 months." True, even the bulls see more losses and writedowns ahead. "However, now is the time to snap up the depressed shares for the long term," says Sowanick. To pave the behemoth's way toward profit growth, he says, Citigroup CEO Vikram Pandit "has a free pass to focus on risk management and slash costs and clean up the balance sheet." (The bank is expected to sell $12 billion of leveraged loans and bonds to private equity groups.) JPMorgan's Juneja argues that although Citi is still under pressure for the near term and management's credibility "remains cloudy," it's attractive on its valuation and "much better footprint for long-term growth." He sees Citi (a client) earning $1.69 a share in 2008 and $3.50 in 2009, up from 71 cents in 2007.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Look for the Multi-Color Label

The printed labels you find on consumer products are big business—$13 billion a year and growing. A leading independent label maker is Multi-Color (LABL) (LABL), whose top customers are Procter & Gamble (PG), Colgate-Palmolive (PL), PepsiCo (PEP), and No.2 U.S. brewer Miller. Investors have now turned more upbeat because of its acquisition early this year of Australia's Collotype, which specializes in wine bottle labels. That should boost Multi-Color's sales 18.2% in 2008 and 57% in 2009. "Multi-Color's global reach will become wider," says Peggy Farley, CEO of Ascent Capital Management, which owns shares. She sees the stock, now at 22.77, rising to 35 in a year. Stephen O'Neil of research firm Hilliard Lyons (he owns shares) rates it a buy and sees profits of $1.32 a share in 2009, vs. $1.12 in 2008 and $1.03 in 2007.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Metalico Is Hot in Recycling Scrap

Scrap metal recycling remains robust, mainly because of strong demand from steel mills. "It is where smart-money investors are moving," says Hilary Kramer, chief investment officer at Greentech Media Research. Ferrous and nonferrous recyclers, such as Metalico (MEA) (MEA), are enjoying rising margins and pricing power, she notes, because scrap is in demand in the U.S. and overseas, mainly India and the Mideast. The industry is in early stages of consolidation, says Kramer, who owns shares, as mills such as Nucor (NUE) seek to ensure scrap supply. She thinks Metalico, now at 10, is buyout bait and worth 20. Metalico had solid fourth-quarter results, so Eric Prouty of researcher Canaccord Adams, who rates it a buy, raised his 2008 profit outlook to 80 cents a share on sales of $575 million, vs. 2007's 53 cents on $334 million.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.


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