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Two Ways To Play: Merrill, Citi Snipped

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Strengthen your portfolio in good times and bad.

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Bloomberg reports Merrill Lynch's (MER) and Citigroup's (C) second-quarter earnings estimates were cut by Oppenheimer analyst Meredith Whitney due to expectations of further writedowns related to subprime securities and bond-insurer downgrades.

Whitney said in a report today that Merrill, the third-largest securities firm in the U.S., will likely lose $4.21 per share. This compares with her earlier estimate of a profit of $0.20 per share. In addition, she expects the bank to write down $5.8 billion with $2.5 billion directly related to last month's downgrade of the bond insurers.

As for Citigroup, Whitney says the bank will likely lose $1.25 per share, compared with her prior forecast for a gain of $0.21 per share. She believes Citigroup may disclose writedowns of as much as $12.2 billion, $3.6 billion of it coming from exposure to the monolines.

Whitney maintains an "underperform" rating on both stocks.

From the Bull Pen: Today's lesson was that oversold stocks can quickly become more oversold. Nonetheless, bulls looking for an upside play might consider JPMorgan (JPM). Professor Quint Tatro mentioned that it could lead the market to the upside.

From the Bear Cave: The financial ETF (XLF) is falling to levels not seen since 2003, but the stock has fallen nearly 10% this week. Those bearish can fade the next rally for a downside try.
No positions in stocks mentioned.

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