Since bottoming in March, Capital One (NYSE: COF) rocketed to $30 by early May. The stock gave back some of those gains, but still trades for approximately more than 100% of the cover price.
The reason for the big gain is directly correlated to TARP and a belief that credit card companies will do better than most expect.
I'm still skeptical.
While it may be true that a collapse comparable to last fall's banking crisis is unlikely, the entire credit card industry is still in difficult territory. The world is changing, and consumer spending habits reflect that change. Rather than defaults being the big issue here, I would worry about usage instead.
Credit card shredding parties may become vogue as consumers repair personal balance sheets. And that's bad news for companies like COF. I would sell Capital One at these prices.
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Reader Comments (Page 1 of 1)
7-18-2009 @ 7:17PM
Donovan said...
Something just ain't kosher at Cap One these days. I'm not sure just whats up. But their sending out notices to card holders that state your interest rate is going up. If you don't like it, you may choose to opt out. However, your account will be immediately closed. And you will not be permitted to re-open another line of credit with Cap One again. PERIOD!
Citibank is doing much the same. thousands of account holders APR rates are going up to 29% Notices are on the way. If ya don't like it. Your account will be closed. Citi also issues AT&T credit cards. Same applies for AT&T card holder accounts. 15 Years, never a late payment, never over limit. As a matter of fact. Never carried a balance over $2,000 It seems the lower your balance is, the higher they jack up your APR rate.