What happened

Shares of Citigroup (C -1.16%) traded more than 6% higher today as of 10:46 a.m. ET after Warren Buffett and his company Berkshire Hathaway disclosed that they have taken a stake in the struggling bank.

So what

Berkshire's first-quarter 13F filing, which shows what stocks the conglomerate bought and sold in the first three months of the year, revealed that Buffett had purchased roughly 55.2 million shares of Citigroup for a total value of nearly $2.95 billion. The purchase equates to roughly 2.5% of Citigroup's outstanding shares. It also means that Buffett and Berkshire bought Citigroup at an average price of roughly $53.40 per share.

A line moving higher in stock chart.

Image source: Getty Images.

Berkshire took an interest in bank stocks in the first quarter, after seemingly souring on the sector during the pandemic when it sold giants like JPMorgan ChaseGoldman Sachs, and Wells Fargo. Berkshire's 13F filing also revealed that the company had opened a new position in Ally Financial.

Citigroup has many of the characteristics of a classic Buffett stock. It is well below its tangible book value, or its net worth, and trades at a significant discount to peers and is one of the big bargains in the banking sectors. The stock also has an annual dividend that exceeds 4% at these levels. Management has said it will buy back stock when it is able to.

Now what

Citigroup is a hotly debated stock among investors. Some believe it's a bargain and some believe it's a value trap, having generated weaker returns than peers for years now.

I am personally in the bargain camp. The bank's relatively new CEO, Jane Fraser, has launched a strategy refresh that includes selling most of Citigroup's international consumer banking operations and becoming a much simpler bank. It is also investing heavily to fix long-standing regulatory issues. The road may not be easy or short, but I do see a path.