American Express Company (AXP): Don’t Leave Home Without This Stock

Earlier this year MasterCard introduced MasterPass, its digital wallet, which will also break into the funds-transfer market for mobile phones. Juniper believes the mobile funds-transfer market will grow rapidly, estimating that more than 85% of payment terminals will accept cashless payments by 2016.

Although Visa also still owns the U.S. purchase-volume market for credit customers, its encouraging that American Express Company (NYSE:AXP) has overtaken MasterCard during the past two years to move into second. As seen below, for 2012, American Express now owns 15.6% of the U.S. purchase-volume market compared to MasterCard’s 14.1%. Discover appears to present little competition, given it owns less than one-fifth of the market share that American Express does, at only 3.2%.

The hedge fund move

Capital One has some of the most robust hedge fund interest with 58 hedge funds long the stock at the end of 1Q. This was a 6% fall from the previous quarter, but includes Andreas Halvorsen’s Viking Global as having the largest position among hedge funds, at $595 million (see Viking’s newest picks).

Meanwhile, Discover had 46 hedge funds long the stock after an 18% increase from the end of 2012. Donald Chiboucis’ Columbus Circle Investors had the largest position in the stock at $273 million, or 3.1% of the fund’s 13F portfolio (check out Columbus Circle’s top stocks).

Heading into Q2, a total of 47 hedge funds were long American Express, with notable billionaire Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.B) having one of the largest positions in the stock at $10.2 billion, making up 12% of Berkshire’s 13F portfolio (see Buffett’s top stock).

Bottom line

As credit markets begin to loosen up, I believe there will be a return to credit card spending, where American Express Company (NYSE:AXP) has a stronghold in the market. With a forward P/E ratio of 14 times, the valuation is also compelling. American Express should continue to reward shareholders with its dividend and price appreciation on the back of a rebounding economy.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends American Express and MasterCard. The Motley Fool owns shares of MasterCard. Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Don’t Leave Home Without This Stock originally appeared on Fool.com and is written by Marshall Hargrave.

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