In my nearly two years penning articles for StreetAuthority, I’ve made my share of winning and losing calls. Thankfully, the track record has been largely positive, so I hope I’ve made readers a lot more money than I’ve lost them. As much as I hate the idea of a bad stock pick, I still have to track the idea to learn from any mistakes I’ve made. Indeed, you learn a lot more about what doesn’t work as an investment thesis than what does work.

In that light, I’m still licking my chops on my bullish view of Citigroup (NYSE: C). In hindsight, I missed some clear red flags. And I looked too far down the road in laying out a bullish thesis, acknowledging (but virtually ignoring) the fact that major near-term challenges remained in place.

I first wrote about Citigroup last December, predicting shares would trade up 50% from a (10-1 reverse split adjusted) $46 to $70. Instead, shares languish under $30, less than half my initial target price. What went wrong? Plenty…

For starters, I was bullish on Citigroup’s big push into fast-growing economies such as China, India and Brazil. It’s a wise move that will eventually pay off handsomely, but I simply overlooked the fact that to achieve growth, the bank is making heavy investments in each country, building up staff in anticipation of higher levels of business. In fact, Citigroup has been losing money in these new markets and will only move into the black sometime next year, according to management. Analysts have been steadily lowering their profit forecasts for Citigroup, due in large part to higher-than-expected expenses for this emerging-market expansion.

Second, I held a bullish view of Citigroup even as the European banking crisis was starting to look like a very big problem for the banking industry. Citigroup and its U.S.-based peers actually have minimal exposure to Greece, and I assumed investors would eventually distinguish between U.S. and European banks in terms of exposure to a possible default in Greece. Instead, bank stocks around the world are feeling the heat from the European problems. Here in the United States, most major banks — including Citigroup — sell for well below tangible book value, which is somewhat unprecedented in the modern era.

Lastly, I thought the timing for an entry into Citigroup’s stock was at hand because the unemployment rate was starting to drop, and the U.S. economy could be on the cusp of sustained gross domestic product (GDP) growth in excess of 3%. At least, it looked that way last winter… The nascent economic rebound petered out, and expectations of rising GDP growth and falling unemployment are off the table for now. As long as the U.S. economy remains weak, there’s a lot less incentive to own banking stocks. Clearly, investors will not be bidding up shares now in hope of an eventual economic expansion that may not come.

In my most recent assessment of Citigroup, which I penned just last month, I once again suggested shares have at least 50% upside (which unfortunately would simply bring the stock back up to the level it was last December when I first wrote about it). My new forecast was simply based on an expectation that shares would trade up very near the company’s $48 per share in tangible book value. This is sound logic in a “normal” economy, but as long as the economy remains weak, it’s increasingly clear investors aren’t being lured in by stocks simply because they are below book value.

Investors need to see catalysts, and right now, Citigroup lacks them. To be sure, the bank still looks like a solid earnings play, with per share profits expected to rise 15% this year and 25% in 2012, to about $5 a share. The fact shares trade for less than six times projected 2012 profits would seem like a catalyst. But it’s not. Investors not only need to see Citigroup deliver on those expected 2012 profit goals, they need to see better traction in the aforementioned emerging-markets push. This is still a bank poised for better days down the road, but we’re not there yet. And there’s little reward for looking too far ahead in this challenging economy.

So what have I learned?
 

• Never ignore the macro backdrop. I looked at Citigroup in a vacuum and ignored the still-strong headwinds facing the economy and banks.

• When a company is making a big push into new markets (as Citigroup is), don’t simply focus on revenue opportunities. Also take note of what the near-term impact on expenses will be. In this case, I overlooked Citigroup’s spike in expenses, simply because management and the analysts that follow Citigroup weren’t talking about it. I know better than that…
   
• Stay timely. In a more normal economic environment, you have to peer down the road, anticipating what a company will be doing 12 or 24 months from now. Yet in an uncertain economy, just getting past the next quarter is hard enough. And many investors won’t give any credit for long-term growth plans.

Action to Take –> I still like this stock. One day, perhaps in 2012, it could nearly double to reach book value, or close to the $50 mark. And a year or two after that, it could well hit my initial $70 target, about 160% higher from where it is now, because the bank is capable of producing $7 to $8 a share of earnings in a better economy. But it makes little sense to buy this stock until the entire group of storm clouds passes. If the Greek crisis finally gets resolved, if U.S. unemployment starts to fall and if Citigroup’s emerging-market expansion efforts prove to be profitable, then this stock becomes timely and could easily double or more.