We recently published a list of 15 Best Stocks to Buy According to Hosking Partners. In this article, we are going to take a look at where American Express Company (NYSE:AXP) stands against the other best stocks to buy according to Hosking Partners.
Hosking Partners was established in 2013 by Jeremy Hosking as an independent partnership that offers a single global equity strategy. The firm appeals to investors seeking long-term returns and innovative thinking employing a capital cycle approach to investing. It has a diverse set of stocks in its portfolio that belong to a variety of industries consisting of AI, shipping, and financial services, among others. Jeremy Hosking earned an MA from the University of Cambridge, after which he served Marathon Asset Management 26 years as a founding partner and lead portfolio manager. There he contributed to developing the capital cycle approach to investment.
In its recent blog about shipping, Hosking Partners believes that understanding the cycles in different classes of shipping and global trends is essential for successful investment in the industry. Currently, Shipping (covering the container, dry bulk, product tanker and LNG sub-sectors) represents 1.25% of the portfolio. Global trade has declined as a percentage of GDP since 2010 caused by deglobalization, accelerated by the COVID-19 pandemic and geopolitical instability from the Russia-Ukraine war. This trend, coupled with the energy transition, is expected to constrain future supply and increase commodity price volatility, benefiting shipping by enabling cross-border trade.
Furthermore, shipping is a significant emitter of CO2, accounting for about 3% of global emissions. Environmental regulations aim to reduce emissions, but uncertainty over future fuel technology deters investment in new ships, leading to a tighter supply. The industry’s efficiency, measured by emissions per tonne-km, remains high compared to other transport modes. The shipping industry is at a pivotal juncture, with significant transformations driven by AI, the energy transition, and ESG considerations.
Another industry that Hosking Partners talks about is copper mining. Copper is often seen as a barometer for economic health and is crucial for the energy transition, including electric vehicles, power grids, and wind turbines. Wall Street banks are optimistic about copper prices, forecasting significant gains. Citi analysts suggest that prices could surge to over $15,000 per ton in the next 2-3 years if a strong economic recovery occurs, while their base case projects a rise to $12,000 per ton with modest demand growth through 2025 and 2026. Bank of America has also increased its 2024 copper price target to $9,321 from $8,625, citing tight mine supply and high demand driven by the energy transition as key factors.
However, some experts are cautious. Colin Hamilton of BMO Capital Markets argues that commodity markets tend to self-correct, and if supply issues persist, demand may adjust, potentially leading to lower prices. Hamilton suggests that while high price targets might be temporarily achievable, adjustments in demand could follow. The market may see a modest surplus due to increased mined supply, which is projected to grow by 4-4.5%. This is largely driven by new greenfield and brownfield projects. Despite the near-term surplus, long-term scarcity is anticipated as regulatory and political challenges in South America could impede the development of new mines.
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A close-up view of a payment terminal, capturing the sophistication of a payment network.
American Express Company (NYSE:AXP)
Hosking Partners’ Stake Value: $72,296,625
Percentage of Hosking Partners’ 13F Portfolio: 2.67%
Number of Hedge Fund Holders: 68
American Express Company (NYSE:AXP) operates through multiple segments—U.S. Consumer Services, Commercial Services, International Card Services, and Global Merchant and Network Services—contributing to its diversified revenue streams. The company continues to showcase strong financial performance, making it an attractive investment due to its solid fundamentals. In Q2 2024, American Express reported impressive earnings per share (EPS) of $4.15, significantly exceeding expectations of $3.26, demonstrating its ability to generate strong earnings even in challenging economic conditions.
The company achieved a 9% year-over-year revenue growth, driven by strong performance across all major segments and regions. This growth is largely attributed to its premium customer base, known for high spending and excellent credit profiles. American Express has consistently attracted and retained these customers, evidenced by 24 consecutive quarters of double-digit growth in card fee revenue. Strategic investments in marketing, product innovation, and technology further enhance customer loyalty and engagement.
The sale of Accertify in Q2 2024 added an after-tax gain of $479 million, which American Express plans to reinvest into its core business, emphasizing its commitment to sustainable growth. The company’s disciplined expense management and ability to scale operations efficiently allow for substantial investment in growth initiatives while still delivering strong earnings. With an increased EPS guidance range of $13.30 to $13.80 for the full year, American Express is well-positioned for continued growth, making it a strong buy for investors seeking reliable returns.
Artisan Select Equity Fund highlighted American Express Company (NYSE:AXP), in the first quarter 2024 investor letter in the following words:
“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 7th on our list of the best stocks to buy according to Hosking Partners. 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 an AI stock that is more promising than AXP but 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.
