Word: citicorp
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Nobody would think the worse of him if Prince Alwaleed bin Talal bin Abdul Aziz al Saud joined the selling stampede. The tumbling value of Citicorp alone has cost him, as the banking company's largest shareholder, $640 million by the time the clock strikes noon on Wall Street. But to Alwaleed the only question is: At which precise moment should he strike? He and his advisers have spent six months studying 40 companies. Now prices are becoming more of a bargain by the second. So many stocks, so little time. Alwaleed sits elbows up at a cockpit-style desk...
...Alwaleed had the itch to diversify overseas. Sagging oil prices had produced a severe recession in the kingdom, creating a feeling of unease made worse by Saddam Hussein's invasion of neighboring Kuwait. Alwaleed already owned 4.9% of Citicorp--a percentage that allowed his ownership to be anonymous. But with the bank wobbling and the stock falling, he soon made his name known by tripling his stake...
...keep his operation lean yet opportunistic, he outsources his consultants--Citicorp for investment banking, Arthur Andersen for company advice, Saatchi & Saatchi for p.r. and Hogan & Hartson, a Washington law firm, for legal matters. (Alwaleed is the first to notice that the initials of these firms form the acronym CASH...
...market is flying in the exact opposite direction the pundits told us it would. It rallies 100, pauses for its breath down to plus 30, and then rallies another 100, and it is clear by midday we will have a rout to the upside. Guys who passed on buying Citicorp at 105, and then 110, and then 115, and then 120, and then 125, reach for $128 stock. I personally moved Telebras 10 points in a futile attempt to buy 25,000 shares. At the bottom the screens simply failed to function, and nobody really knew where anything...
...gets to the heart of the problem. It's not so much that companies can't thrive without exports to Asia; it's that ebullient investors have put such absurdly high prices on stocks that even a minor disappointment in earnings will let out a lot of air. Consider Citicorp, which gets about 20% of its profit from Asia. Cut the Asian profit in half, and the bank's overall earnings would decline from an estimated $9.54 a share next year to $8.57. Even if Citi's stock sells at 15 times earnings, the same lofty valuation (for banks...