Citigroup (C, Financial) was our largest detractor for the period due to Covid-19-related concerns that have hurt the entire financial sector, as well as a handful of Citigroup-specific headlines that amplified near-term uncertainty. We believe that investors' short-term focus can cause them to miss the bigger picture. The company has remained profitable throughout the Covid-19 crisis to date. It continues to operate with significant excess capital relative to regulatory minimums, even as it has added more than $10.5B to credit reserves year to date. We believe the company is proving its resilience during a real-life stress test. Yet, despite this positive early evidence, Citigroup currently trades at only 60% of tangible book value and slightly over 5x 2019 earnings per share. Given that we think the company's normalized earnings power is greater than what it achieved in 2019, we find these valuation metrics especially attractive. As we move beyond the pandemic, we think investors' focus will shift to the underlying quality of the business and they will value the resilience Citigroup demonstrated during this crisis.
From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund third-quarter 2020 shareholder commentary.
