Did Warren Buffett Make a Mistake Selling This High-Yield Dividend Stock? Wall Street Thinks So.

Globe and Mail

a day ago

Warren Buffett became a legend for his investing prowess. These days, though, the 94-year-old billionaire is disinvesting more than he's investing. Buffett's Berkshire Hathaway has been a net seller of stocks for 10 consecutive quarters.
In the first quarter of 2025, Buffett & team reduced Berkshire Hathaway's holdings in six stocks. They also completely exited the conglomerate's positions in two stocks. Citigroup (NYSE: C) was one of them.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »
But did Buffett make a mistake selling this high-yield dividend stock? Wall Street thinks so.
Buffett's about-face on a turnaround play
Buffett first initiated a position in Citigroup in the first quarter of 2022, buying around 55.2 million shares. Although bank stocks seemed to have lost some of their luster in the eyes of the Oracle of Omaha, Citigroup probably looked like a good turnaround play to him.
Shares of the financial services giant had fallen sharply in early 2022, and Citigroup was the only large U.S. bank that traded below its book value. CEO Jane Fraser faced a steep challenge to right the ship.
But Buffett likes solid underlying businesses available at attractive valuations. He scooped up shares of Citigroup and waited for the comeback. At first, the decision to buy the struggling bank stock might have seemed unwise, as Citigroup's shares continued to decline throughout much of 2022 and 2023. Buffett didn't flinch, though. Berkshire even bought another 89,000 or so shares of Citigroup in the first quarter of 2023.
Buffett's patience was rewarded beginning in late 2023. Citigroup, along with the overall stock market, gained momentum that lasted throughout 2024 and into early 2025. Buffett sold most of Berkshire's stake in the big bank in the fourth quarter of 2024 and fully exited the position in the following quarter.
Why did he bail out on Citigroup? We don't know for sure. It could be that Buffett thought Citigroup's turnaround was complete. Whatever his reasoning, Buffett almost certainly locked in a tidy profit for Berkshire by selling the stock when he did.
Analysts overwhelmingly disagree with Buffett's move
However, Wall Street seems to think Buffett & team made a mistake by selling all of Berkshire Hathaway's Citigroup shares. Of the 22 analysts surveyed by LSEG in May, 16 rate the bank stock as a buy or strong buy. The others recommended holding Citigroup.
This overwhelmingly bullish take on Citigroup isn't new, either. Throughout the first quarter of 2025, at least 75% of analysts surveyed by LSEG viewed the stock as a buy or a strong buy with no analysts recommending selling.
Wall Street's consensus 12-month price target for Citigroup reflects an upside potential of nearly 12%. The most optimistic analyst surveyed by LSEG thinks the stock can soar almost 46% over the next 12 months. Even the most pessimist analyst only sees a downside of around 7%.
Who's right about Citigroup: Buffett or Wall Street?
Was Buffett right to sell Citigroup, or are the majority of Wall Street analysts right about buying the stock? My answer is... both are probably right.
Let's first look at Wall Street's perspective. Analysts see a solid financial services company with rising revenue and profits. They see a stock that trades at only 10.3 times forward earnings estimates. They see a share price that's still more than 25% below book value. And analysts recognize how attractive Citigroup's forward dividend yield of nearly 3% is.
When we take these factors into account, it's easy to understand why so many Wall Street analysts recommend buying Citigroup stock. The optimistic consensus 12-month price target also makes sense.
However, let's try to see things from Buffett's eyes. The investing icon isn't as big a fan of bank stocks as he has been in the past. He's likely concerned about the impact of tariffs on the U.S. economy. As previously mentioned, Buffett probably made a nice profit for Berkshire on its Citigroup investment. It's not hard to appreciate why he and his team might have chosen to sell the stock when they did.
The bottom line is that it can be the right move for one investor to buy a stock while simultaneously being the right move for another investor to sell the same stock. Should you buy Citigroup stock? Or should you sell it? It depends on your personal circumstances, investing goals, and risk tolerance.
Should you invest $1,000 in Citigroup right now?
Before you buy stock in Citigroup, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Citigroup wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,761!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $826,263!*
Now, it's worth noting Stock Advisor 's total average return is978% — a market-crushing outperformance compared to170%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor.
See the 10 stocks »
*Stock Advisor returns as of May 19, 2025