Warren Buffett, American Express (AXP), Visa (V) and MasterCard (MA)

Page 1 of 3

American Express Company (NYSE:AXP) is a true old age behemoth of investing. The company is one of Warren Buffett’s favorites and is one if the Dow 30. However, how does the company stack up to its newer rivals – Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA)

One of the main draws of investing in a company like American Express is the fact that the company can run itself. There is no need for complicated management decisions like industrial companies or basic material companies. In addition, both Visa and MasterCard have the same kind of business and they could effectively both run themselves.

BERKSHIRE HATHAWAYAmerican Express has one major difference between Visa and MasterCard. American Express lends money to customers and derives the vast majority of its income from customer interest on credit card loans. Both Visa and MasterCard only offer a payment network, skimming revenue off of each transaction and neither of them has any loan exposure or potential customer default risk.

So, who presents a better investment opportunity right now based on Warren Buffett’s investing criteria?

Buffett’s Berkshire already owns all three of these card providers, but what about the average Foolish investor who does not have as much cash as Buffett and was not savvy enough to open a position in American Express all those years ago?

So the criteria I will be reviewing the companies on are:

1. Value – A basic ratio comparison of each firm. It’s well-known that Buffett likes to buy stocks that are going cheap and undervalued vs. their peers. This will help put together a quick overview.

2. Company Performance For Investors – What is the ROE for each firm and who is generating the best and continually improving return on equity for equity holders.

3. Cash Flow And Profitability – A good free cash flow can be the key for future shareholder returns. A decent cash flow usually stems from a decent profit margin.

4. Debt And Balance Sheet Strength – does the company have and debt? Can it repay/service interest on current debts?

5. Do The Company’s Products Rely On A Commodity? – Companies that have products based on commodities do not have pricing power, therefore margins can become unpredictable.

6. Is The Stock Selling At A 25% Discount To Its Real Value – The deal clincher for Buffett, even if all of the other points are positive, if the stock is not a buy.

Page 1 of 3
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!