This Upscale Oligopoly Player Has Long-Term Potential Here

The market’s selloff over the past few months may be nearing a peak. While there could be another leg lower first, the drop has hit great companies to own hard enough to be a buy here.

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  • That’s especially true for companies that don’t have many competitors. Most mature industries only have a few companies, and have to cater to customers on other criteria than price. When the economy recovers, as it always does, these companies can move to new highs.

    In the tightly-controlled credit card industry, American Express (AXP) caters to higher-end clients with higher incomes. They’re still benefitting from spending and travel trends, as seen by the company’s most recent earnings.

    American Express has now had six consecutive quarters of record revenue growth.

    Shares are up just 7 percent over the past year, having given up bigger gains over the past few months.

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  • Action to take: Investors can get shares at about 15 times earnings right now, and 12 times forward earnings, a solid deal given American Express’s position as a leader in the credit card processing space.

    At current prices, shares yield about 1.6 percent, and AXP has a history of increasing its dividend over time.

    For traders, shares look ready to rebound, especially following their latest earnings report. The January 2024 $150 calls, last going for about $5.75, could see mid-to-high double-digit gains in the coming months.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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