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American Express: The Specialty Finance Compounder
We discussed American Express $AXP for our Chit Chat Money Not So Deep Dive episode this week and I came away really impressed.
Since AmEx operates across the entire transaction lifecycle, they earn money in a number of ways. The primary ones being:
1) Merchant Fees
2) Card Fees
3) Interest Income
Because of this diverse revenue mix, AmEx's earnings have been generally well protected from the recent surge in interest rates. Most credit providers can't say the same. Additionally, AmEx is home to a highly attractive cardholder base which should give them better spending resilience in an economic downturn.
Here are 4 charts that I think encapsulate the durability quite well and indicate that this could be an even better business in 5 years.
Total Cards-In-Force since 2012:
Average annual fee to be an AmEx Cardholder:
Merchant Acceptance rate in the US:
And an increasingly younger age demographic for new accounts:
If you want to listen to an entire breakdown of the business, here's our episode on American Express. https://open.spotify.com/episode/02CYJiR78ge96EYza3YqL7?si=Lp7h-dQUQ_arWbtUuAbTEw
Spotify
American Express (Ticker: AXP) Not So Deep Dive
Listen to this episode from Chit Chat Stocks on Spotify. American Express (AXP) is a global financial services company that provides payment and travel-related services to consumers and businesses worldwide. The company was founded in 1850 and is headquartered in New York, New York. At the end of the month, we will publish an Arch Capital episode that will cover the company: Nelnet. Listen closely as Brett and Ryan go through the history, financials, and future prospects of American Express. Enjoy the show! ****************************** This episode is sponsored by Stratosphere.io, a web-based terminal for financial data, KPIs, and more. Try it out for FREE or use code “CCM” for 15% off any paid plan. Sign up here: https://www.stratosphere.io/ ****************************** Subscribe to our Substack to receive free show notes and charts that go along with every episode: https://chitchatmoney.substack.com/ Want updates on future shows and projects? Follow us on Twitter: https://twitter.com/chitchatmoney Contact us: chitchatmoneypodcast@gmail.com Timestamps Company Background | (2:23) Industry | (20:47) Management & Ownership | (24:58) Earnings | (30:24) Balance Sheet | (35:02) Valuation | (38:24) Our Analysis | (39:28) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show.
Bufftett has kept $AXP as a core portfolio position for decades for good reasons ! Despite competition from all directions, it seems to be holding up really well. Running those airport lounges must be expensive though - perpetually crowded each time I visit one!
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