In a new Motley Fool series, we pit two stocks against
each other on five criteria to determine the better
buy.
Today's match-up features two companies that have been
multi-baggers since being left for dead back in March.
It's the
down-on-its-luck casino giant,
MGM Grand (NYSE: MGM) versus the
one-third-government-owned
Citigroup (NYSE: C).
Using five short-of-scientific-but-carefully chosen
criteria, let's determine which is the better buy:
Round 1: Balance sheet
MGM is absolutely flooded with debt, but it
gets the nod over Citigroup because of clarity. I defy you to
read through Citi's financial statements and get any
reasonable handle on its portfolio of loans and derivatives.
Note that the same could be said for
Wells Fargo (NYSE: WFC),
JPMorgan (NYSE: JPM), or
Bank of America (NYSE: BAC), but Citi holds
the record for most uttered WTF's: What the financials?!
Round 2: Operations
Operations is a tough call. Like many of the
casino companies (See
Las Vegas Sands (NYSE: LVS) and to a lesser
extent
Wynn (Nasdaq: WYNN)), MGM is enamored with
growth at an unreasonable price. Citi was as well, but now it
must divest itself of assets in hopes of coming out stronger.
In theory, both businesses are cash machines, whether through
favorable probabilities or favorable interest spreads. I'll
give the slight nod to MGM's cash machine since I don't
believe the banking sector has learned its derivatives
lesson.
Round 3: Safer bet
In other words, which company will put you in
a better position to "never lose money" (as super-investor
Warren Buffett says)? If you haven't gathered yet, both
stocks are risky propositions (especially after their
run-ups), but the nod goes to Citigroup because of its "too
big to fail" status.
Round 4: Sexier bet
On the flip side of safe is sexy, the upside
growth potential. Both companies are already quite large, but
MGM continues to try to get bigger while Citi is trying to
get smaller. This time Vegas is sexier than Wall Street.
Round 5: CAPS rating
Both
Citigroupand
MGMrate
two stars (out of a possible five) in Motley Fool
CAPS. Hence, our community isn't very bullish on either
stock's chances of beating the S&P 500 from here. Looking
at the raw CAPS data, though, they're liking Citi just a
smidge more.
The blow-by-blow recap
MGM Grand
Citigroup
Balance Sheet
X
Â
Operations
X
 Continued... |