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

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!