Lampert Sparks Hope for a Citi of Dreams

Shares of Sears Holdings, which Lampert cobbled together by merging Kmart and Sears Roebuck, have rocketed over 80% since the beginning of 2005. The move came as Lampert essentially thumbed his nose at the retail industry's same-store sales race between Wal-Mart (WMT Quote) and Target (TGT Quote) to cut costs, raise prices and deliver profits to his delighted shareholders.

Lampert employed a similar strategy at AutoZone (AZO Quote), where he accumulated a stake in the late 1990s. Under his influence, shares of the auto-parts retailer more than doubled in less than three years as it focused on profitability and return on investment at the expense of revenue growth.

That sort of strategy is a far cry from Citi's practices. Last year, the company's earnings fell 8.7%. Its expenses rose 15% to $52 billion, while total revenue inched just 7% higher to $89.6 billion.

"We threw up our hands last year because positive expense leverage was promised to us many quarters prior to that, and it never came," says Salvato.

His fund bought stakes in Citigroup, Bank of America (BAC Quote) and U.S. Bancorp. (USB Quote) years ago, and Citi has been a consistent laggard.

"Citigroup is a franchise company with a premier name, and we're not selling it, because we believe its potential will be realized," says Salvato. "We're a growth manager, but we find such compelling value in Citi that we hope somebody is going to do something to help us realize it."