Discover Financial Services: Is it a buy?

I'm not the biggest fan of Discover Financial Services (NYSE: DFS), the credit-card company that competes with MasterCard (NYSE: MA), Visa, Inc. (NYSE: V), and American Express (NYSE: AXP). I currently like Visa the best. Why? I like the brand, I like the fact that it doesn't have direct exposure to loans, and I think there's a lot of upside left to its stock price on a long-term basis (granted, the stock hasn't been strong lately). Nevertheless, I have to wonder if there might be trade potential with Discover's stock.

It's not so much the Q4 earnings. Net income from continuing operations more than doubled to $0.92 per share, something that looks great on the surface. It was helped along, however, by settlement proceeds relating to antitrust complaints against Visa and MasterCard. Not only that, but when you take a look at the consumer-confidence landscape, you'll see that it's pretty dreadful. It doesn't take too much thinking to realize that spending will be down and bad loans most likely will be up going forward. This doesn't benefit Discover. But, according to this article, government help does. Management wants access to some of the monies available in the now-famous federal rescue package. Bank-holding status, if Discover gets it, will do the trick.

This is why I see some trade potential with the stock. It rose the other day on the news, and as I am writing this now, the stock is up another 3%. If one was to play around with Discover, one should only do so temporarily, in my opinion. I think, on a longer-term basis, that either Visa or MasterCard are much better options for investing in the eventual consumer rebound (whenever that decides to happen, of course). Again, all you have to do is remember that Discover has more on the line in terms of charge-offs and loan provisions. Yes, the government can help out Discover's situation, and that will be valuable, but I still wouldn't want the company as a core member of my portfolio.

Disclosure: I don't own any company mentioned; positions can change at any time.