This financial stock has increased 264% since I bought it – why not sell it?
I invested a large amount of money in individual stocks for the first time in 2010. It was in 2014. Till that time I was mainly investing in index funds while learning strategies like stock analysis and asset allocation. Sure, since the early 2000s I’ve been buying small amounts of shares in certain companies, but I’ve invested more than 90% in mutual funds.
Then, in early 2014, I rolled over from my previous employer’s 401(k) and finally decided it was time to buy some big (for me) positions in individual stocks. I invested in four stocks, two of which are still in my portfolio today. Both produced positive total returns, but with a total return of 264% over a 10-and-a-half-year period (about 13% per year). American Express (NYSE:AXP) It has become prominent.
A lot has happened in the 10 and a half years I’ve been an Amex shareholder, and not all of them have been good. For example, in 2016, American Express and Costco They ended their 16-year partnership, and at the time, Amex’s co-branded Costco credit cards accounted for about 10% of Amex cards in circulation and about 20% of interest-bearing credit card loans.
However, there were also some great developments. Shortly after the Costco partnership went away, Amex revamped its flagship Platinum card to offer benefits such as free Uber rides for young affluent customers. The Platinum Card has been a major growth driver ever since.
American Express It has done well in adopting online banking products such as savings accounts that provide a low-cost source of capital. The 2020 acquisition of Kabbage significantly enhanced the company’s commercial banking offerings.
Overall, since I bought the shares, American Express has increased its earnings by 94% compared to 2014. Bottom line revenue increased by 147%. And in return, Amex has reduced its outstanding share count by more than 26 percent since mid-2014.
Even in the most recent quarter, Amex grew its revenue by 8% year-over-year, despite significant reports that consumers put the brakes on discretionary spending. The company’s loan portfolio grew 10 percent year-over-year to $202 billion, and annualized card member loans and receivables show a 1.9% increase in billings. Decline And it is much lower than peers, which shows the quality of Amex assets. For context, Capital one The credit card has a net interest rate of about 5.6%.
First of all, I bought Amex as a long-term dividend growth opportunity, and the stock (and the business) are doing exactly what I want. Management has done a great job of consistently growing the business despite various political and economic conditions and many setbacks, and I have no reason to believe that will change anytime soon. As a credit card lender, Amex has an excellent customer base in terms of loan quality and impressive product portfolio. As a closed-loop payment network, Amex earns swipe fees that should gradually increase with customer spending over time.
