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Branding, international expansion, great ROE and share holder friendly.
- AXP has one of the top global brands. It attracts high-spending, creditworthy customers who are attractive to banks that issue credit cards. Since AXP won the anti-trust suit in 2004, many banks have started offering American Express branded cards.
- There is a worldwide trend to use credit cards instead of cash, which has boosted the stock prices of Visa (V) and MasterCard (MA), but AXP should also be included in this group, especially longer term as India and China produce more upscale consumers.
- AXP is a Warren Buffett stock that usually sells at a premium PE. But it was available yesterday at a forward PE ratio of only 11.5 times earnings.
- Return on equity has been running over 35% per year.
- Zero sub-prime exposure.
- High free cash flows and rock solid balance sheet.
- Shareholder friendly. AXP pays a growing 1.7% dividend and management also returns 3-4% a year via share buybacks.
- Great Sponsorship: Aside from Berkshire Hathaway, AXP is the #1 holding of Blue Ridge Capital (Griffin) and large positions are held by Clarium Capital (Thiel), Eton Park Capital (Mindich) and Tweedy Browne among others.
- High lending standards.
- The travelers check business is a true cash cow.
