Guest Post Submitted by Stupid Equity Guy
Citi Upgrades Lehman to Buy on Friday… claims “Reality Will Trump Fear”
Lehman, who obviously did not get the memo to play nice with its sisters, on downgraded almost every bank they cover Thursday –even some that may already be bankrupt just for the fun of it. This shocking attack at its fellow financial sisters went unnoticed at first.
The Lehman Brothers “Suits” cut C’s price target to $34 dollars from $37 dollars. This act of kindness (keeping C’s relative overweight exposure) was instantly rewarded by the Analysts @ C, who somehow found it in themselves to upgrade the Leisure Suits over at Lehman’s to an outright Buy after years of ignoring them.
The Shiti report had the following nuggets of brilliance in it.
… and Lehman’s management team’s excellent track record of creating value and managing risk all serve as excellent downside protection…
Am I the only adult that remembers the events of 1998 and LTCM and the proverbial Lehman Lie of that time? There were 2 of the Big Sisters who did not fully play with the rest of the family during that event: the Bears and the Brothers in their Leisure suits…
The Shiti Report continued with…
We see 70% upside in Lehman shares. LEH’s valuation is compelling based on virtually any historical metric, leading to an excellent risk/reward opportunity. Using our DCF based valuation model, LEH shares are discounting less than a 10% over-the-cycle ROE and our 15% ROE forecast results in a $65 stock or almost 70% upside. Furthermore, on an absolute P/B, tangible P/B and relative P/B basis, Lehman is trading at some of its lowest levels in more than a decade.
Now that the Bear has been punished, the market bottom callers have blown their bugle and the 5th straight month of negative declines is almost over, the next round of Bank Bumper Cars is about to break out in our opinion. We expect that Shiti will be punished for upgrading Lehman at some karma based moment in the future.
…Stupid Equity Guy agrees on the surface with Citi and doubled his short position on Citi for being really stupid instead of just Shiti Stupid… He cut his double short position on Lehman to just a short position to free up the love to increase his Shiti Short.
Disclosure: Stupid Equity Guy is short C, LEH, UBS, MS, WM specifically besides a holder of SKF and other stupid positions to hold in this market.