We recently compiled a list of the 14 Best 52-Week High Stocks to Buy According to Short Sellers. In this article, we are going to take a look at where American Express Company (NYSE:AXP) stands against the other 52-week high stocks.
The U.S. stock market has been on a roll, with major indices clocking double-digit gains even with the U.S. economy showing signs of weakness. The gains have come from investors shrugging off the uncertainty around the U.S. presidential election and monetary policy to continue betting on various counters.
Consequently, the S&P 500 is already up more than 17% for the year, driven by gains in the communication services and financial services sectors. Likewise, technology stocks have also contributed to driving the overall market high as investors continue paying close attention to some of the big plays around artificial intelligence.
READ ALSO: 18 Best 52-Week Low Stocks to Buy Now According to Short Sellers and Top 10 ADR Stocks To Buy According to Hedge Funds.
The tech-heavy NASDAQ index, which gained 18% for the year, comes on growing expectations that the U.S. Federal Reserve has hit the peak of its monetary policy tightening spree. With expectations that the central bank will start cutting interest rates by as much as 50 basis points, according to CNBC, investors’ sentiments around tech stocks have improved significantly for September.
Investors remain optimistic about the stock market outlook heading into year end because of the positive impact of low interest rates. The Fed’s cutting interest rates will result in a significant drop in borrowing costs, which bodes well for capital-intensive businesses looking to access cheap capital.
The central bank aims to achieve a soft landing for the economy. In this situation, inflation must return to the 2% goal without the U.S. economy sliding into a downturn. If the central bank reduces interest rates prematurely, it faces the danger of a severe surge in inflation. Conversely, if it reduces rates too late, it might cause a severe recession.
While interest rate cuts are expected to offer a much-needed boost, disappointing earnings, and lackluster guidance could curtail market gains, especially for the best 52-week high stocks to buy, according to short sellers.
Several companies are under immense pressure after their valuation skyrocketed amid the artificial intelligence frenzy. Consequently, any concerns about slow earnings and revenue growth should send jitters, triggering significant pullbacks.
Adam Turnquist, the head of technical strategy at LPL Financial, mentioned that the S&P 500 typically experiences about three annual declines of at least 5%. On average, it has seen around one 10% decline each year.
“Expressing this data another way, 94% of years since 1928 have experienced a pullback of at least 5%, and 64% of years have had at least one 10% correction,” Turnquist said, according to USA Today. “We believe that how common these occurrences are should provide comfort to equity investors, allowing them to be patient.”
Looking forward to the rest of the year, experts predict that the best 52-week high stocks to buy, according to short sellers, could keep rising, but they caution about the dangers of premium valuations.
At the same time, financial experts believe that although economic expansion will slow down in the next few months, they don’t see a situation that could cause a recession.
Our Methodology
To compile the list of the best 52-week high stocks to buy now, according to short sellers, we first screened for stocks that were trading near their 52-week highs (0-10% range) using the Finviz stock screener. Next, we looked at their short interest and picked the stocks with the lowest short interest that were the most popular among elite hedge funds. The stocks are ranked in descending order based on their short interest.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up view of a payment terminal, capturing the sophistication of a payment network.
American Express Company (NYSE:AXP)
52 Week Range: $140.91 -$ 261.57
Current Share Price: $259.84
Short interest rate: 1.33%
Number of Hedge Fund Holders: 68
American Express Company (NYSE:AXP) is a financial services company that operates an integrated payment system. Its products and services include credit cards, charge cards, banking, other payment and financing products, and network services. The company charges an annual fee and transaction fees on its cards. The fee model drives loyalty and profitability.
It remains one of the best 52-week high stocks to buy, according to short sellers, given that its core business revolves around an affluent client base that has money to make purchases regardless of the economic situation.
The company has been flying high, expanding its operations and bolstering revenues by over 50% since 2021. Its revenue in the second quarter was up 8.50% to $16.3 billion, driven by higher net interest income, increased Card Member spending, and continued strong growth in card fees. Additionally, American Express Company (NYSE:AXP) is also benefiting from adding 23 million cards in Q2 and expanding to over 30 million merchants.
Optimism for American Express’s future is not unfounded, given the tremendous opportunities for growth created by the rise of digital payments. As the use of cash and checks declines, this creates a favorable environment for American Express Company (NYSE:AXP) to grow its customer base and the amount of payments it processes over time.
Furthermore, this company is excelling in attracting a younger demographic. These customers account for more than 60% of the new consumer accounts and offer a higher potential for lifetime value to American Express compared to acquiring an older cardholder.
American Express Company (NYSE:AXP) stock trades at a forward price-to-earnings ratio of 19, which is a huge premium. However, this is expected of a high-quality enterprise backed by solid underlying fundamentals. Additionally, it offers a 1.09% dividend yield.
In Q2 2024, the number of hedge funds in Insider Monkey’s database with stakes in American Express Company (NYSE:AXP) increased to 68, up from 66 in the previous quarter. The total value of these stakes is approximately $38.48 billion, with Warren Buffett’s Berkshire Hathaway being the largest stakeholder.
Artisan Select Equity Fund commented on American Express Company (NYSE:AXP) in its Q1 2024 investor letter as follows:
“American Express Company (NYSE:AXP) shares rose 22% this quarter. This is an interesting case study given our earlier discussion about inflation. American Express operates one of the largest credit card networks in the world. Its revenue is largely a function of a fee rate applied to the dollar value of goods and services that are transacted through its network. That dollar value is, of course, nominal. As inflation pushes up the value of those goods and services as it has for the past few years, American Express will capture that value through its fee structure. The past few years inflation has clearly been a benefit. Aside from its inherent inflation protection, the business is a very strong one. Payments continue to shift toward electronic forms, benefiting American Express. It also has a strong brand that attracts loyal and highly profitable customers that are the envy of the industry. Recent results have been strong with revenues moving nicely ahead of GDP.”
Overall AXP ranks 11th on our list of the best 52-week high stocks to buy according to short sellers. While we acknowledge the potential of AXP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.