Larry Bellehumeur

Is American Express Still Cheap?

AMEX is also very tied to the Business Travel / Corporate Market (both from their Travel Services sides, but more importantly, Business travelers tend to spend a lot and pay their bills). Until you start seeing a rebound in that space, it won't fully have wings.

As well, they are tied (as Einstein points out) more to the overall credit balance of consumers than a Visa or MC. Although this gives them great leverage when the consumers bounce back, it does make them more vulnerable. It would be the higher Beta way to play a Consumer recovery, that is for sure.

I do like AMEX long-term, as Consumers are loading up their savings, and once they see the job market going, it will be too hard for them to resist buying things again. I would think it may have spectacular earnings in 2011/2012, just no need to buy at this price. We could see a big pull-back on this (maybe 15-20%) in the fall, as I think we will fall into a "Mini Double-Dip". It would be a great entry point for a long-term hold at that point.

Disclosure - I do hold some AMEX, but a much lower position than I had before (I unloaded it in the low $30's).

Good article....

Visa: Not Everywhere I Want to Be

Take Visa and MC for more "secure" approaches with less downside risk, due to the fact that they are only "networks". Take AXP for long-term growth, as a play on the rebound in Consumer spending, which will happen at one time or another. As long as you have a 3-5 year time frame, you will make a lot of Cash on AXP.

Disclosure -- Long AXP, V