This article is part of our Real-Money Stock Picks series.
Oh how the media love to rush to judgment.
Following the release of Citigroup's (NYSE:C) fourth-quarter earnings, The Wall Street Journal published the headline "CEO Corbat's Cachet Is Diminished as Citi's Latest Results Disappoint," referring to Citi's CEO Michael Corbat. In its coverage, The New York Times wrote that "the results come at a critical time for the bank's chief executive" (it appears the Times has since changed the wording).
Corbat took over as Citi's CEO in October of 2012, shortly after the close of the bank's third quarter. That timing makes a comparison the fourth quarter of 2012 a good one-year measure on the early days of Corbat's tenure.
Income from operations essentially doubled over Corbat's first year, to almost $2.6 billion in the final quarter of last year. A chunk of the improvement was due to Citigroup reversing bad-loan reserves it had taken in the past. But that mirrored the fact that the actual credit losses Citi has been taking -- both in its "good" Citicorp business and "bad" Citi Holdings arm -- dropped.
Profits were also bolstered by cost-cutting measures. Observers can lament that cost-cutting can only go so far, which is true, but it's nevertheless making the bank more profitable. Citi's efficiency ratio -- a measure of how much revenue is eaten up by costs -- fell from 77% in the fourth quarter of 2012 to 67% this past quarter. That's a laudable improvement over a year's time.
What'd he really do?
To be sure, the quarter didn't live up to the high hopes that some experts had, and it's hard to spin some of the numbers in a positive light. It's also fair to ask what of the improvements are truly attributable to Corbat's leadership. Improvements in credit measures, for instance, are more of a result of an improving economy and housing market.
But it's that latter point I think best highlights the problem with the post-quarter media coverage of Citigroup. Sober investors considering the promise that Citi holds under Corbat should be investors thinking in terms of his impact over five or 10 years, not one year. A banker who came up through the ranks of Citigroup (and its predecessors) over more than a quarter century, Corbat appears to be a CEO ready to lead for the long term. Investors should get used to thinking about the situation in those terms.
Underscoring this eye toward the long term was Corbat's response to a conference-call question from veteran bank analyst Mike Mayo. When Mayo questioned the pace of the wind-down of Citi Holdings, Corbat replied:
Again, I think that we've got to look at what's obviously in the best interest of our stakeholders and shareholders and when you look at, would the world like, would the shareholders want us to destroy value, simply to get a headline GAAP reduction in Citi Holdings.
In other words: I'm not going to make moves that simply look good on the surface. I'm going to focus on doing the right things.
As of this writing, Citigroup's stock has fallen close to 6% since the earnings release. I believe most of that has been driven by extreme short-term thinking that's too wrapped up in the one-year Wall Street time frame.
However, I believe this also presents a good opportunity to expand my Citigroup holdings in my real-money portfolio. In short: I'm buying more.
Adding here too
While Markel (NYSE:MKL) hasn't announced fourth-quarter earnings yet, and thus hasn't had the opportunity to be knocked down by short-termism, like most stocks, early 2014 hasn't been especially kind to Markel's shares. Through the early days of the year, the stock has lost almost 3%.
Why use that as a seemingly lame excuse to buy more? Mostly because I don't feel like I need an excuse to buy more. The conditions that led me to buy in the first place still exist (and if you need more you can check out what fellow Fool Mike Olsen said when recently buying more).
Investing doesn't always have to be about finding something new or having some mind-blowing catalyst or news event. Sometimes it's just about buying more of a company you recognize to be great and is trading at a fair price (or better!).