(V), American Express
(AXP), and Mastercard
(MA) have continually alerted me with juicy shorter-term chart patterns as of late, so I decided it’s time to take a closer look at the fundamental side of things on credit card companies, and I found some good stuff.
In the Mastercard example, credit volume is on the rise and international growth is a big part of their strategy; more than 60% of their transaction volume is done outside the United States, of which around 30% is in Asia and Latin America. The Asia and Latin America markets, by the way, grew 30% for Mastercard in 2010 alone. If you believe in emerging market growth, there may be a play here.
In the U.S., marginally improving consumer credit seems to be helping; consumer loan charge-off rates and consumer loan delinquency rates have dropped over the past 24 months, from roughly 10% down to 8% and 6.5% to 4% respectively. What's important to note, however, is that over the same time, outstanding revolving credit has also dropped.Share Repurchase Programs
Mastercard’s share repurchase programs are well known, and on April 12 Mastercard announced they will double the program from $1 billion to $2 billion. American Express also has further 2011 share repurchase plans, although last week’s earnings announcement did not go into details to my knowledge. Share repurchase programs on the margin should be viewed positively by investors. Rating agency Fitch last week reaffirmed the A+ investment grade rating on American Express.
Capital One also stepped on the mount last week (April 21)and unleashed solid earnings, closing the week up 6.5% and right at fresh 2.5 year highs.
Visa and Mastercard have not yet announced their Q1 earnings but are up for bat on May 5th and May 3 respectively. Charts
After announcing earnings last week, American Express is still holding up well and looking to break above a key resistance area around $47 on the weekly chart.
Over the past few weeks Visa has managed to break out of a long-term narrowing trading range where it had lingered. It has moved to the upside. Next up is Visa’s earnings announcement.
Mastercard, too, will announce its earnings next week. Much like Visa, it is currently breaking higher and out of a long-standing albeit wide trading range.
Volume on all three charts by the way leaves something to be desired. Given that the entire equities rally from the bottom of 2009 has come on decreasing volume, however, makes one wonder if the lack of volume really matters until markets can float (or sink) freely again.
On the charts the credit card companies look enticing as well. Mind you most of them have already doubled or tripled off the early 2009 lows -- as such, to some extent I feel my analysis here fits the "better late than never" slogan. However, the seemingly solid fundamentals, institutional investors being still underweight the financial sector, and nice looking charts make a compelling story, if only for the time being.Editor's Note: This article was originally posted on The Steady Trader.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or o=
pinion about the performance of securities and financial markets by the wri=
ters whose articles appear on the site. The views expressed by the writers =
are not necessarily the views of Minyanville Media, Inc. or members of its =
management. Nothing contained on the website is intended to constitute a re=
commendation or advice addressed to an individual investor or category of i=
nvestors to purchase, sell or hold any security, or to take any action with=
respect to the prospective movement of the securities markets or to solici=
t the purchase or sale of any security. Any investment decisions must be ma=
de by the reader either individually or in consultation with his or her inv=
estment professional. Minyanville writers and staff may trade or hold posit=
ions in securities that are discussed in articles appearing on the website.=
Writers of articles are required to disclose whether they have a position =
in any stock or fund discussed in an article, but are not permitted to disc=
lose the size or direction of the position. Nothing on this website is inte=
nded to solicit business of any kind for a writer's business or fund. M=
inyanville management and staff as well as contributing writers will not re=
spond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.