Current Date and Time: Wednesday, December 3rd, 2008

American Express

November 24th, 2008
The reason for all this volatility in the market: OBAMA.  The mainstream media just refuse to acknowledge this:  Wallstreet is extremely nervous at the prospect of the first openly socialist president and as a result, firms are day trading or at least short term trading.  It’s the only way for them to make any money in this market.   It makes no sense for them to be long in anything right now, due to pressure to show profitability in order to please their investors.  (By firms, I’m referring mostly to Hedge Funds, Mutual Funds, and major private equity players.)   This is the reason for the wild swings in the financial markets.  Don’t be fool by the pity party thrown by the mainstream media for Wall Street.  The fact of the matter is: the sharpest minds on Wall Street knows how to make money in any market conditions.  The true victims in this volatile market are the “Joe Plumber” mediocre mutual funds, sorry-excuse-for an investor investors, who just love to buy high and sell low.   More on this in future articles, it’s time to move on to American Express(AXP).

This slump in the market is an absolute Godsend for value investors like myself.  This type of market only comes along once every 15-20 years.  There are bargains abound, but like buying fish at an open market, you have to find the freshest catch and throw away the stinkers.  (Read my Wal-Mart page for the fresh catch of the day.)  I still like American Express a lot, it's a boring investment and is still taking a major beating (see my August 2008 article) but it’s still a strong business and will settle down when comrade Obama settle himself in the White House by late next year.  Yes, investors will adjust our strategy against the socialist messiah.  In the meantime, I’ll continue to collect some sweet AXP divedends.  My next purchase price point is 14 dollars.
~Huy Nguyen

August 2008
American Express (AXP) has been in existence for a very long time, since 1850 as a matter of fact.   AXP is as American as baseball and apple pie.   The brand is recognizable worldwide, AXP has a presence in at least 130 countries.   I realized that doesn’t mean much in this economy.   But one has to analyze things objectively.   Yes, the company has been taking a beating lately, along with the rest of the financial sector due to the mortgage mess, even though AXP is not directly involved in home purchase lending.   They are, however, in the credit business, but unlike Visa and Master Card, AXP has other very high-margin, valuable revenue generating businesses in addition to the credit card transaction business.   And unlike major banks, AXP does not carry billions of dollars of bad mortgages in its books.

This is not to say, however, that the road ahead is without pitfalls. I’m fully aware that tough economic times mean consumers will be slow to pay their credit card bills.   The one saving grace that AXP has is that they have always been very conservative in terms of consumer credit evaluations and granting credit to consumers.   Additionally, a majority of American Express cardholders are wealthier people. (That’s why I don’t have one.)   They may not use their cards as much in a recession but the chances of them skipping out on paying their bills are much lower than the average populace.

I think AXP is extremely undervalued under twenty-two dollars per share, I bought some more at twenty-one.   C’mon, twenty-one dollars?   Are you kidding me?   These are 1997 prices at a fraction of what the earning are now.   This company is worth at least ten dollars above its current trading price.   Pricing will stabilize once the dust from the exploding credit market bomb has settled, and investors get a sense of what the new president’s economic policies will be and adjust their investment strategies accordingly during the next three quarters.
~Huy Nguyen