AXP

Only One Bank Fails Fed’s Stress Test

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The banking industry is based almost entirely on the confidence of intermediaries and counterparties that make up the building blocks of the financial system. An investment in a bank or money center must come with the acknowledgement of the distinct possibility that another financial crisis may occur at an unknown time in the future. Though we don’t expect one anytime soon, it’s worth noting that there have been three significant banking crises during the past three decades alone: the savings and loan crisis of the late 1980s/early 1990s; the fall of Long-Term Capital Management and the Russian/Asian financial crisis of the late 1990s; and the Great Recession of the last decade that not only toppled Lehman Brothers, Bear Stearns, Washington Mutual, … Read more

Thank you…

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By Brian Nelson, CFA Earlier this week, I received an email from a colleague and valued member of our services. I wanted to share it here for others to read. I haven’t included his name, but if he wants me to, I can add it in. It is filled with wisdom, experience and kindness. And it really made my year to read his words. The Valuentum community, I believe, is the best community of investors out there. Sir, if you do happen to read your own email on our site, we very much have appreciated your feedback, and we hope to continue to live up to your praises. We are dedicated, and our team has been rejuvenated by your words. … Read more

Visa Boasts One of the Best Business Models on the Market Today

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Global payments technology company Visa (V) showed us why we continue to like the company when it reported fiscal first-quarter results Thursday. The firm is not a bank and does not issue cards or extend credit or set rates/fees for account holders of Visa-branded cards, but it does operate one of the most advanced processing networks, and we can think of few other business models that generate a stronger competitive advantage. Visa takes on no credit risk–unlike American Express (AXP) and Discover Financial (DFS)–but remains an integral part of the secular trend toward a cashless society and online consumption, where most transactions are not made with cash. Visa is the largest retail electronic payments network in the world based on … Read more

Surveying Fourth Quarter Performance at the Money Center Banks

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Let’s examine a number of reasons why we don’t prefer banking entities and take a look at recent performance from industry constituents. A challenging rate environment and declining mortgage originations offer key headwinds.

Great Early Holiday Sales Read for Best Ideas Portfolio Holdings

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On Saturday, IBM Digital Analytics Benchmark, a source for real-time cloud-based online retail data and analysis, revealed strong online retail trends for this Thanksgiving and Black Friday: US Holiday shoppers once again shopped online early for the best deals with Thanksgiving Day online sales increasing by 19.7 percent over 2012. This momentum set the stage for a record Black Friday, with online sales growing 18.9 percent over the same period last year. The biggest surge came from mobile sales increasing to 25.8 percent of total online sales for Thanksgiving and 21.8 percent for Black Friday as consumers went from the dinner table to their tablets to lock in the best offers. In addition, IBM reported that New York City consumers … Read more

Banks Pass Self-Administered Stress Tests

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The cohort of “too big to fail” banks such as JP Morgan (click ticker for report: ), Bank of America (click ticker for report: ), Goldman Sachs (click ticker for report: ), Wells Fargo (click ticker for report: ) and Citi (click ticker for report: ) recently released self-administered “stress tests” to see if they could withstand turbulent economic conditions. According to the banks, they are all in great shape and can meet minimum capital requirements in the event of adverse economic conditions. These tests, self-administered, are secondary to the annual March stress test performed by the Federal Reserve. However, these tests have the similar assumptions to mimic how well the banks would hold up if economic conditions returned to … Read more

The Mortgage Refinancing Boom Could Be Ending

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Early Wednesday morning, the Mortgage Banker’s Association (MBA) announced that refinancing activity declined 20% from one week earlier. Adjusted for the Labor Day weekend, total mortgage applications dropped 13.5% from the previous week. Consistent with the dramatic upward movement in interest rates, refinancing activity is down 71% since it peaked during the week of May 3, 2013. Why Do We Monitoring Refinancing Activity? When homeowners refinance, a couple outcomes can occur that pump more dollars into the economy. First, with a refinanced mortgage, owners may choose to take equity out of the home, allowing for large purchases like vehicles or even home remodeling. CoreLogic recently reported that 2.5 million more residential properties have returned to positive equity in the second quarter … Read more

The Fed Fights Back for Visa and MasterCard

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Wednesday afternoon, shares of Best Ideas Newsletter portfolio holding Visa (click ticker for report: ) recovered modestly on news that the Federal Reserve will appeal US District Court Judge Richard Leon’s ruling that the current cap on debit card transactions of $0.21 was inconsistent with the intent of the Durbin Amendment. Between now and the appeal, it seems likely that debit card caps will remain at $0.21 per transaction. Bad Idea from the Start? Because Visa and rival MasterCard (click ticker for report: ) have often been the target of regulatory scrutiny, it seems unlikely that any government-affiliated organization would show support. However, we think the Fed is well-aware of the unintended consequences of the debit card transaction fee cap. … Read more

Best Idea Visa Blows Past Expectations

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Wednesday after the market close, Best Ideas Newsletter portfolio holding Visa (click ticker for report: ) reported wonderful results for its fiscal year 2013 third quarter. Revenue surged 17% year-over-year to $3 billion, easily exceeding consensus estimates. Earnings-per-share growth was even better, jumping 20% year-over-year to $1.88, well above consensus expectations. Excluding accrued litigation expenses, free cash flow is running at about $5 billion year-to-date, equivalent to an amazing 57% of revenue. Few companies are able to match Visa in terms of converting revenue into cash for shareholders. Image Source: V 3Q FY2013 Investor Presentation Visa continues to ride the secular trend in credit payments to strong payment volume growth. Total payments processed increased 11% year-over-year to $1.09 trillion, driven … Read more

The E-Commerce War Between eBay and Amazon Heats Up

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In order to help drive more sellers on to its platform, Best Ideas Newsletter holding eBay (click ticker for report: ) announced new, less complicated fee structures. The firm already charged lower fees than Amazon (click ticker for report: ), but the new structure gives greater transparency to sellers. The move is very positive, in our view, as we think it can help drive a stronger network of fixed price sellers to eBay. After becoming associated with auctions since its inception, eBay is in the process of becoming a destination for buyers of everything, much like Amazon has done successfully over the past several years. While Amazon may look slightly more attractive in the near-term because more buyers are on … Read more