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You won't find too many fans of the credit card/revolving debt sector, but American Express (AXP), which I first wrote about on April 27, 2009 at a price of $27.28, in my interpretation, still has considerable appeal. Here's why: I expect credit card charge-offs to continue to stabilize in the quarters ahead, with a reduction in delinquencies, improving cash flow for AXP. That will help build capital for future expansion/new business projects. A better pace of small business/medium business expansion adds to the positive story, and AXP still has ample room to increase use of its business cards in the emerging markets of Asia and Latin America.
Meanwhile, my sense is that consumer spending, while it won't confuse any economist with the "Roaring 20s," could eek-out an incremental gain in 2010: that doesn't sound like much, but given the off-the-table concerns of six months ago, it's music to the ears of institutional investors. The First Call FY2010/FY2011 EPS estimates for AXP are $2.63 to $3.18.
Technically, American Express' stock chart has pulled-back in-sync with the Dow's recent retreat on jitters about the sustainability of the global expansion, and the stock has also fallen below the key, 50-day moving average. Still, AXP's uptrend remains intact and I view the stock as attractive here, around $36-39.
2010 Outlook: I view American Express as a long-term play, but if investors are looking to sell AXP within the year, it's probably best to take your profits after it rises to $47-49, if it fails to rise above $50.
Stock Analysis: I consider American Express to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in AXP now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of my AXP position before April 2010 and I'd put a sell/stop loss at: $27.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
Technically, American Express' stock chart has pulled-back in-sync with the Dow's recent retreat on jitters about the sustainability of the global expansion, and the stock has also fallen below the key, 50-day moving average. Still, AXP's uptrend remains intact and I view the stock as attractive here, around $36-39.
2010 Outlook: I view American Express as a long-term play, but if investors are looking to sell AXP within the year, it's probably best to take your profits after it rises to $47-49, if it fails to rise above $50.
Stock Analysis: I consider American Express to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in AXP now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of my AXP position before April 2010 and I'd put a sell/stop loss at: $27.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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