Lampert Sparks Hope for a Citi of Dreams

As word spread that hedge fund guru Ed Lampert has silently amassed a stake valued at over $800 million in the world's largest bank, Citigroup (C Quote), frustrated investors cheered in hopes that Wall Street's sleeping giant will finally wake up.

Shares of Citigroup, which have been stagnant for most of this decade, jumped $2.12, or 4%, to $54.91 on Wednesday after Lampert disclosed in a regulatory filing that he's been buying shares of the banking juggernaut since last year.

The news comes as Citigroup has been slowly losing credibility with investors as its expenses have continued to grow faster than its revenue despite a series of promises that change was at hand.

Lampert, known for taking an active role in companies in which he holds stakes, has been a relentless cost cutter, and investors are praying that his foray at Citi will bring about long-awaited gains in the company's stock price.

"I'm thrilled to see Lampert getting involved here, because while we see plenty of value in [shares of Citi], we're very impatient to get something done," says Carl Salvato, a portfolio manager with Great Companies, which has $400 million under management. "There's been some turnover in the management ranks at Citigroup, but come on. Don't just rearrange the chairs on the decks of the Titanic. Let's do something more dramatic here."

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But any dramatic move -- at least one spurred on by Lampert -- is far from a sure bet.