Investing Wisdom on Contrarian Investing

These quotes are meant to be an entry point into the mindset of a contrarian investor. That is what my blog is all about. Look at what companies Wall Street is bashing, if you can find out what they’re overlooking, and then buy that company at a great price. Hopefully these quotes will show you the pros of becoming a contrarian investor, because although you’ll feel like an outsider, it’s a great way to gain an edge on most other investors when done properly.

Howard Marks – “All great investments begin in discomfort, since the things everyone likes and feels good about are unlikely to be on the bargain counter.”

“Our success rests on having the discipline to wait patiently for opportunities to present themselves and then having the courage to run towards them when everyone else is running away.” Steve Leonard

“Being a value investor means you look at the downside before looking at the upside.”-Li Lu

“The wisdom of crowds sometimes means finding the lowest common denominator”-Sam Zell

“The Black Sheep Is Sometimes The Only One Telling The Truth”-Grace Ink

“Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently.”-Walter Isaacson

Warren Buffett once said, “The difference between successful people and really successful people is that really successful people say no to almost everything.”

“The wisest rule in investment is: when others are selling, buy. When others are buying, sell.” Jonathan Sacks

“The secret to success is to know something nobody else knows.”
— Aristotle Onassis

“It’s actually pretty easy to be contrarian. It’s hard to be contrarian and right.”

“The overwhelming majority of people are comfortable with consensus, but successful investors tend to have a contrarian bent.”- Seth Klarman

“When you truly don’t care what anyone else thinks of you, you have reached a dangerously awesome level of freedom.”-Jim Carrey

It’s easy to talk the game , but living the game is something else-Charlie Munger

“ To succeed as a contrarian you must recognize what the crowd believes, have concrete justification for why the majority is wrong, and have the patience and conviction to stick with what is, by definition, an unpopular bet.” Author: Whitney Tilson

“ I usually ignore advice from other traders, especially the ones who believe they are on to a “sure thing”. The old-timers, who talk about “maybe there is a chance of so and so,” are often right and early.”-Ed Seykota

“Some people can’t move in silence because they desire attention more than progress.”-Karla Tobie

“Work hard in silence, let your success be your noise.”
Frank Ocean

“There are no bad days in the market. When the market is down, you’ve got bargains, and it’s lovely to think of what you are buying at low prices. When the market is up, the bargains have gone, but you’re rich.” BRUCE GREENWALD (FIRST EAGLE FUNDS

“I think a lot, but I don’t say much.” Anne Frank

“You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”-Benjamin Graham

“Traders in the zone don’t need to know, and don’t care, what the market is going to do next. They know what they are going to do next. And that makes all the difference.”-@tradingmasteryz

“Buy the damaged stock, not the damaged company “-Jim Cramer.

“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”-Paul Samuelson

“Be fearful when others are greedy and greedy when others are fearful.”-Warren Buffett

“Value investing is at its core the marriage of a contrarian streak and a calculator.”-Seth Klarman

A value or contrarian investor can’t tell you what will outperform the market in any given year. They can, though, point out what’s cheap right now. This information is an excellent gauge when looking at what is likely to do well in 5 or more years.

“The smaller the better. The more illiquid the better. The less institutionally owned the better. The more misunderstood the better. The less talked about the better. You make money by driving through the fears of other investors.-@iancassel

5 contrarian beliefs:
What is obvious to you is not obvious to others-Don’t take tips or advice-But when people sell and sell when people buy, when you see it in the news and newspapers, it’s already over-no one sees a bubble when their income depends on it.
Forbes

A Great Contrarian Stock:Low price to earnings ratio Low price to cash flow Low price to book Low price to dividend. The bottom 20% of the market is the focus. Low payout ratios
High return on equity. More than average dividend yield
Pre-tax profit margins at minimum 8%
M1Finance

When it comes to diversification and the stock market, just ask yourself, “am I better off by owning a larger basket of averageness or a smaller basket of greatness?”

“No formula in finance tells you that the moat is 28 feet wide and 16 feet deep. That’s what drives the academics crazy. They can compute standard deviations and betas, but they can’t understand moats.”-Warren Buffett

Charles Schwab: A Value Stock To Consider Adding To Your Portfolio

The Impact of the Coronavirus on Schwab

       2020 has been a disappointing year for Charles Schwab shareholders, as the onset of the Coronavirus pandemic created a crash in the stock market. Overall, a sharp drop in total client capital, coupled with the overall negative market sentiment, were the main reasons behind the sell-off in Schwab’s stock. The move to no cost investing and the Fed keeping interest rates anchored near 0% through 2023 has been a challenge for Charles Schwab and other retail brokers to overcome.

       Charles Schwab stock price 37.73. It is down 20.67% this year, while the S&P 500 is up 4.64%. Over the past 3 months, it’s been up 13.00%, and it’s up 5.39% over this past month, showing little price volatility. The decline in Schwab’s stock price was accompanied by a strong reduction in total client assets and an increase in customer cash as a % of customer assets in February compared to January. The largest driver of the company’s earnings is net interest income, which in recent quarters has made up around 60% of net revenue. Rates gradually declined in 2019 and into the first couple of months of 2020. However, in March 2020, the Federal Reserve dramatically cut the interest rate to 0%-0.25% to deal with the economic downturn caused by the coronavirus. This made it harder for Schwab to make money from brokerage activity (especially with new initiatives like zero commissions on trades, zero account minimums, low cost mutual funds) and its banking business.

Americans Line up in Droves to Invest

       So how does Charles Schwab plan to continue making profits and recover strongly from the impact COVID-19 has dealt it? For one thing, masses of Americans, especially younger ones, received $1200.00 stimulus checks and became more engaged with their money, deciding to put a piece of it into the stock market. When the stock market crashed this past March, many people saw volatility on Wall Street, and thus seized on the opportunity to grow their money because of it. Bolstered by zero-commision trading and fractional shares, people lined up in droves to open up brokerage accounts. The major online brokers: Charles Schwab, TD Ameritrade, E-Trade, and Robinhood, saw new accounts grow as much as 170% in the first quarter, when stocks experienced the fastest bear market and the worst first quarter in history. Charles Schwab CFO Peter Crawford commented, “We continue to drive strong business momentum; August new accounts and core net new assets were among the highest we’ve seen for a summer month in recent years, and client assets reached a record $4.49 trillion at month-end, up $773 billion, or 21%, year-over-year. Thus far in the third quarter, equity market returns have been quite strong and client trading activity very robust relative to prior years. In my opinion, this should only push Charles Schwab’s stock price higher.

A Game-Changing Acquisition

       Another feather in Schwab’s cap is that because of the Federal Reserve’s amenable monetary policy, the company’s financials will likely get support from inorganic growth efforts, due to three M&A it made pre-coronavirus, including a 26 Billion dollar one with competing online broker TD Ameritrade. The timing of these couldn’t have worked out better for the company, because not only has the coronavirus pandemic slowed merger and acquisitions (M&A) activity in the financial sector, it has even forced many banks to terminate deals.

       Morningstar, who already considered Charles Schwab to be a wide moat, believes that later this year, it should close on its acquisition of TD Ameritrade. They go on to say that, “analysts believe Schwab can take as much as $2 billion of operating expenses out of Ameritrade over three years, which would lead to 25% earnings accretion. It might not fully offset the loss of income from lower interest rates, but the combined firm should be much stronger competitively than Schwab is today.” After its merger with TD Ameritrade is fully completed, Schwab will have created a combined institution with $5.1 trillion in assets under management and 24.1 million brokerage accounts, serving 14,500 registered investment advisors. Charles Schwab also estimated that the deal would result in $3.5 billion to $4 billion in savings over time.

Own Your Tomorrow

       By investing in Charles Schwab, I believe you are buying a well managed, dividend paying, long term value stock. The company’s CEO, Walt Bettinger, has been in his position for almost 12 years. The management averages 3 years together. And the Board of Directors have been in place for just about 9.5 years. This is a company with a strong management team.

       For those who only invest in companies which have stable dividends that have grown over time, “Talk to Chuck.” The company has been paying out a stable dividend since 1989. The last two years the dividend has been its largest ever, with a 1.91% yield this year. It has also steadily grown over the past 10 years. Lastly, it is expected to be covered by earnings for at least the next 3 years. This is another reason to own Charles Schwab.

I see Charles Schwab as a value stock. It carries a Forward PE Ratio of 15.1x, below the 17.9x of the US Market. By investing in Schwab, you’re buying a company at a material discount, because Wall Street is focusing on The Fed’s low interest rates instead of what lies ahead for it in the next 18-36 months. Yes, you have to be a patient investor. The American economist Paul Samuelson put it like this, “investing should be more like watching paint dry. If you want excitement, take $800 and go to Las Vegas.” If your investing principles align with his first statement, you’re buying stock in a company that might report slow earnings because of low interest rates for some time, but the payoff of when Schwab and TD Ameritrade come together as a whole will make your wait well worth it. Keep in mind, the acquisition will produce a combined organization with $5.1 trillion in assets under management and 24.1 million brokerage accounts, serving 14,500 registered investment advisors. Charles Schwab has also estimated that the deal would result in $3.5 billion to $4 billion in savings over time. This will make Charles Schwab the industry leader in retail brokerage. Also, DISFOLD ranked the top 30 American financial companies 2020, listing Schwab as number 16. Just think, in between 11/2 to 3 years, Schwab will be one of the biggest players in the whole financial sector. I see a strong case for an investment in Schwab at a very nice price.

Disclaimer: This material should not be considered investment advice. After Further Review…The Stock is Reversed or Bob Schless are not registered, investment advisors. Under no circumstances should any content from this blog, website, articles, videos, seminars or emails from After Further Review…The Stock is Reversed or Bob Schless should be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for speculative purposes only.

The Coronavirus Pandemic and a Story Of Survival: How Planet Fitness, Ulta Beauty, And Kohl’s Changed Their Business Models To Stay Relevant.

“If you want to succeed in retail, you need to fully commit to off-price or online,”-Jim Cramer, Mad Money, March 5, 2020

       Retailers have been struggling for sometime to compete with the giant Big-box stores such as Amazon, Walmart, Home Depot, and Costco, who offer massive discounts, great selection, and an easy shopping experience. Then the Coronavirus pandemic engulfed America this past March, and most retailers, other than essential ones like pharmacies and grocery stores, were forced to close their doors because consumers were self quarantined. After that took place, retailers needed to make changes to their stores to allow for proper social distancing and hygiene so they could open them safely. Brand loyalty gave way to buying whatever was cheapest. Some retailers, including Hertz JC Penney, Neiman Marcus and Brooks Brothers have already succumbed to the virus and have filed for bankruptcy. Others have laid off employees and are looking for potential buyers.

When I looked at the whole retail landscape, I put together some thoughts as to how things were going to play out. One was that no one was going to be working out at fitness clubs for some time; they would be too hard to sanitize and people would find ways to workout at home via a home gym, a DVD, or a YouTube video. Another thought I had was how were department stores going to keep the lights on as so many of them were mall based and everybody was at home and could buy these goods online for less. Finally I believed that beauty supply retailers were going to suffer, because women weren’t leaving their house for socializing or to work, and when they went to essential stores they were wearing masks. Surprisingly to me, I was wrong. Planet Fitness(PLNT), Ulta Beauty(ULTA) and Kohl’s(KSS) all figured out a way to stay relevant and strategically change their business models after taking a massive hit when the pandemic struck. These changes are having a positive impact on how they now do business, and once the pandemic has ended, they will emerge as stronger companies than they were pre-coronavirus. Here are their stories of revival.

If they can’t come to you, then you go to them.

Planet Fitness has taken a big hit this year due to the pandemic. Their stock is currently at 58.81. They hit their 10-year high of 88.77 on February 19, 2020 and their 52-week low of 23.77 just under a month later at 23.77 on March 18, 2020. This just shows you where their stock could return to once COVID-19 becomes under control. YTD Planet Fitness is down 21,25%, but over the past 3 months it is actually up 3.96%. What sticks out is that not only are Planet Fitness’s earnings expected to grow well annually(38.5% per year), but so are their revenues as well(20.1%). Finally, the company’s earnings have grown by a whopping 43.9% per year over the past five years. Unlike Gold’s Gym, who filed for bankruptcy on May 5, I can’t help myself to see a bright future for Planet Fitness after looking at these numbers once COVID-19 is all behind us. And this is why…

       Planet Fitness has rebounded from the pandemic by giving its members a great workout experience in the comfort of their own home. Not only have they allowed members to cancel their memberships for free, but they also have the industry low cost for people who want to become members as well. But for members who wanted to workout while staying at home, and those who preferred doing it after the stay at home orders were lifted, Planet Fitness boasted a vast library of fitness content from company trainers on its app as well as on YouTube. They also offered live streaming classes with instructors on Facebook as well. Stay at home orders led to a 250% spike in app usage for the company, similar to the enhanced user traffic for competitors such as Peloton. The company also put a lot of money into the sanitation and safety of their gyms when they opened, boosting their member’s confidence towards working out in them once they opened. I didn’t take into account when looking at fitness clubs and the virus was how accessible a fitness club would be. Planet Fitness provided a rapid response, and all types of people craved exercise to reduce stress, stay active and feel good. 

       Also, Planet Fitness only directly owns only 5% of its locations. Franchisees pay for most of the other gyms. So while they have over 2000 locations, CEO Chris Rondeau would like to build out another 2000 long-term. With businesses shutting down and office space opening up, the virus may actually speed up his plan.

Beauty is not what’s on the outside, but what’s on the inside.

       Ulta Beauty’s numbers are drastically down, another retailer victim of the virus. But they’ve done a makeover, and what I didn’t understand about how their business model would survive during the Coronavirus. I completely get it now. 

       Currently Ulta Beauty stock price is 203.00. They hit their 10-year high of 368.83 on July 17, 2019, and their 52-week low of 124.05 on March 18, 2020. YTD Ulta Beauty Inc. is down 19.81%, but for the past 3 months they dip only 5.80%. We have another company whose earnings are expected to grow immensely(53.3% per year) along with decent revenue growth(12.1% per year) expected. Finally, when looking at company numbers, their earnings have grown 17.7% per year over the previous five years. Another company I see thriving once the virus is under wraps. And here’s where I got it wrong…

       Ulta Beauty made a couple of key adjustments during COVID-19. One was developing curbside pickup. Because women who shop at Ulta Beauty know their products, know their selection, and have been using the same beauty products for years. One thing I learned about their business was how loyal their customers are to them. Certain beauticians have been working with them on a personal level for years, and the same goes for the salon department. Their customer care is phenomenal. And this will keep women shopping with them rather than finding another supplier online.

       Ulta’s Beauty’s e-commerce has taken off. They’re up 100%. Through technology, you can take a photo of yourself, use their app to add different lip gloss or eye shadow to it, and the next thing you know a customer is buying new products. Ulta Beauty also has a unique Ultamate Rewards Program that provides customers with a more personalized experience through the use of AI and analytics. 

       Another thing I didn’t factor in when looking at Ulta Beauty was the boom of Zoom. Women want and need to look good when they are on camera. I get that now. The truth is that beauty makes people feel better, allows for stress-release, and provides the opportunity for people to take part in self-care and self-expression. Finally, Ulta Beauty’s diversified business model of many brands, salon services, and locations within local communities ought to position it to come out ahead post-pandemic. 

Expect Great Things.

        The Coronavirus Pandemic hit Kohl’s hard, when they decided to close all 1,110 of its stores on March 19 and didn’t re-open them until May 8. Kohl’s stock is currently at 22.15. Kohl’s 52-week high was 59.28 on November 15, 2019, while its 10-year low was 10.89 on April 3, 2020. YTD, Kohl’s has taken a massive hit, down 56.74%. But over the past 3 months, Kohl’s has rebounded nicely, and is actually up 19.26%. One nice thing about an investment in Kohl’s right now is that it’s a value buy. It’s earnings are also expected to grow tremendously, at a rate of of 101.2% per year. One thing that differentiates themselves from most other apparel retailers who are failing is that it’s debt is well covered by it’s operating cash flow, which gives investor’s confidence that Kohl’s won’t be shutting their doors anytime soon. 

        I am surprised to see a store like Kohl’s back on its feet and growing. I envisioned with so many jobs lost, that people wouldn’t be shopping for new clothes, new bedding, new kitchenware, etc. I envisioned people just using their disposable income on bare essentials such as food, medicine and gas. But I was wrong.

       Outside of auto sales and gas, retail rose a robust 6.7% in June, including more than doubling at apparel stores. I failed to take into account certain things, such as the 2 trillion dollar stimulus package, the desire to look good in front of the camera, electronics people would need to work, use for school, and to entertain themselves. Finally, I didn’t take into account the importance of having a comfortable home that you’d be spending so much time in.

       So how has Kohl’s climbed out of the rubble and forged ahead while so many other retailers remain on life support? For one thing, they, like Ulta Beauty, are free standing brick and mortar stores. This plays in their favor, unlike Macy’s and Neiman Marcus, which are mostly connected to malls. And while many department stores and other apparel retailers have either declared bankruptcy or are in dire straits, Kohl’s will emerge with a larger customer base because of it.

       What Kohl’s has done by teaming up with Amazon to accept their returns and bringing foot traffic into their stores is brilliant. 80% of Amazon customers live within 15 miles of a Kohl’s store. Kohl’s is also leasing space to Planet Fitness (where their push towards athletic apparel should pay off nicely) and Aldi, plus teaming up with in-store Weight Watcher consultants, further emphasizes a visit to its stores that they wouldn’t have seen otherwise.

        Kohl’s has seen an uptick in online sales, with an increase in May of 90%. While the company already boasted a strong presence online before COVID-19, with 24% of its sales coming from there in 2019, this will most likely see an uptick once 2020 is in the books. Furthermore, Kohl’s has always been an off-price shopping store, with great deals offered via their charge cards and coupons. This will help them compete with the Big-box stores when it comes to the more price conscious consumers we see today. Finally, Kohl’s has included a commitment to the in-store shopping experience, and these are all reasons for seeing the company coming out of the virus stronger than it was before it. 

        The Best is yet to come

        The Coronavirus took a massive hit on our economy, and the retail sector took a beating, including the 3 retailers I highlighted in this article. But Planet Fitness, Ulta Beauty, and Kohl’s were either more prepared for the virus when it struck, developed new strategies to help pull themselves up and become profitable again, or had the secret sauce that so many other retailers lacked. What you need to know is that once the virus is contained and our economy makes a strong recovery, these companies will be stronger than they were pre-coronavirus due to how they added on to their business model, and I would expect their stocks to see a steady rise upward. Planet Fitness, Ulta Beauty and Kohl’s can still be considered value stocks if you take into account where they’ve dropped to YTD. You may want to wait until you see what happens to the stock market as COVID-19 continues to surge forward again, because you very well might be able to pick these off at a much cheaper price if the stock market turns for the worse again. But when you see that opportunity come, I wouldn’t hesitate to buy into these 3 retailers. I can’t help but see a ton of long-term growth for all of them over time. 

*Numerical Analysis sourced via SimplyWallSt and CNBC. 

IBM: Is “IT” a Good Investment?

Bob Schless Insider Monkey June 29, 2020

For over 100 years IBM has been one of the most quintessential technology giants in America. Over the past few years, the company has been transitioning from a computer manufacturer to a leading cloud platform and cognitive solutions company. IBM, the common name of International Business Machines Corporation, is one of the largest technology and consulting companies in the world, employing over 350 thousand employees worldwide. IBM achieved a net income of 9.43 billion U.S. dollars in 2019, an increase of just over half a billion U.S. dollars from 2018. IBM has been a disappointment over the past decade, due to lagging revenues, stock performance, and slow to change. The company is in the middle of a major transition in which it is discarding big segments of their business (like building computers) and moving into new, growing areas like cloud computing, artificial intelligence, and quantum computing. Due to a decline in revenue from the old businesses, and the fact that their new businesses aren’t fully developed yet, IBM’s financial outlook has been one in a slow decline for years. When looking at IBM’s transition to the cloud, they just weren’t fast enough. And because of it, the company is now having to play catch-up in this fast-growing market segment, dominated by Amazon.com Inc (NASDAQ:AMZN)’s AWS and Microsoft Corporation (NASDAQ:MSFT)’s Azure.

ibm, closeup, delivery, corporation, white, cyberjaya, mesh, corporate, business, server, sign, symbol, msc, corridor, gdc, technology, building, computer, wall, pc, center,
ibm, closeup, delivery, corporation, white, cyberjaya, mesh, corporate, business, server, sign, symbol, msc, corridor, gdc, technology, building, computer, wall, pc, center,

Many on Wall Street were optimistic about the incoming CEO Arvind Krishna succeeding Ginni Rometty in early April. But that was before the coronavirus put the global economy to a halt. IBM’s stock price is currently $117.19. Year-to-date it is down 12.57%, and in a year it’s down 15.40%. The company hit a 52 week low as well as a 10 year Low on March 23, 2020, at $90.56. A little over a month earlier, IBM hit a 52 week High at 158.75 on February 6, 2020. Knowing this, I ask myself, “What’s changed with the company, other than the coronavirus?” But that’s for later in this article. IBM’s stock has basically dropped twice the amount of the S&P 500 Index since January 31. Regarding the coronavirus pandemic, the demand for IBM’s services fell due to their customer base needing to focus on their most crucial needs. Here’s how chief financial officer Jim Kavanaugh spoke on the effects of COVID-19 on the Q1 earnings call, “As we got into March…we saw a noticeable change in client priorities. With that, there was effectively a pause as clients understandably dealt with their most pressing needs.” He later added, “For those clients that did engage at the end of the quarter, there was a noticeable change in priorities where focus very quickly shifted to the stability of their operations and preservation of cash. They moved ahead with spending that addressed immediate and essential needs, including running mission-critical processes and securing a remote workforce.”

Other factors hurting IBM because of COVID-19 include having over 75% of its revenue coming from the United States and Europe (hardest hit by the virus), and that their costs of products and service is generally on the high side. Because of all of this and the uncertainty surrounding COVID-19, IBM opted to withdraw its full-year guidance for 2020. And on May 22, soon after Arvind Krishna took over, announced layoffs across multiple divisions, due to the outbreak. It was said to have been one of the largest rounds of layoffs in the company’s history.

Unfortunately for IBM, analysts covering the company on Wall Street are expecting it to slump in the coming year, and to lag behind its competition. Revenues are once again expected to fall 3.9% next year, which is an area IBM continues to struggle with. On the other hand, companies in the wider industry are to grow by 9.6% during the same period. Out of the four largest cloud service providers, IBM is growing at the slowest rate and has the smallest market share as well. Simply Wall Street sees IBM’s earnings growing 6.9% per year, while the U.S. market will grow 22.6% per year. They also see the company growing earnings, but not significantly, It’s earnings growth over the past year is 4.4%, underperforming the IT industry’s earnings growth at 15.4%. At the current valuation, IBM has a forward price to earnings ratio of around just below 10, compared to the S&P 500’s average forward Price to earnings ratio of just above 15. After looking at these numbers, you’re forced to ask yourself, “I see IBM as a potential value stock, but can I also see it as a growth stock as well?” If not, there may be other companies to choose to invest in that are both cheap and will bring you more profits during this volatile stock market we’re presently in. Let’s take a look.

Is Big Blue A Stock For You?

IBM, for all the disappointment it has given its shareholders over the past decade, actually has a lot of things going for it during the coronavirus pandemic. Remote-work and video conferencing are a friend to IBM, the transition into hot tech growth areas such as 5G networks, artificial intelligence, the cloud, and quantum computing plays into IBM’s strength. Their 34 Billion dollar Red Hat acquisition in 2019 has started to positively impact IBM’s 2020 1Q revenues, and the architect of the deal, Arvind Krishna, became the new CEO for the company at the beginning of the year. Finally, IBM is a solid value buy for a giant tech company that pays a very nice dividend. So while IBM trails Amazon, Microsoft, and Google significantly in the cloud space, the company has the potential to gain some ground and earn some respect on Wall Street under Krishna’s forward-thinking guidance.

The coronavirus forced companies to have their employees work from home. Many are going to continue once the pandemic is over. IBM has been leading a giant effort to help its clients transition to and manage remote work operations. There is a shift in spending to cloud providers and security and away from PCs and servers. Those companies on the cloud most likely will emerge stronger as their employees work from home. IBM’s effort to expand its AI and cloud expertise to its clients during this period of transition should accelerate its growth in the space. “The key area of focus is to ensure that IBM leads into two major transformational journeys our clients are on, Cloud and AI,” CEO Arvind Krishna said in IBM’s first-quarter earnings call. “I believe that what we are going through today with the shift to remote work, automation, application modernization will accelerate our client shift to hybrid cloud. This gives me immense confidence in our future.”

Growth for IBM will likely rise further as Krishna seeks to de-emphasize or sell lower-performing divisions. The global hybrid cloud market is estimated to grow in size from $36.14bn in 2017 to $171.93bn in 2025. David Parker, global partners and alliances for IBM at Red Hat, sees IBM and Red Hat is a great fit by, “Teaming together to deliver mutual clients open hybrid cloud solutions that leverage the industry expertise IBM has had for years combined with Red Hat’s proven technology and platforms.” I feel this gives IBM a competitive edge as a cloud provider. And with the coronavirus onset, their merging paths come at a better time. Also, The global artificial intelligence market size is expected to reach USD 390.9 billion by 2025, and IBM has been developing this technology longer than any other tech company. In the 5G arena, the market size is expected to reach 58.17 Billion dollars by 2025. IBM entered the segment in May, announcing that it is releasing new edge computing solutions and services, powered by Red Hat, designed to help enterprises roll out, deploy, and manage 5G networks. Finally, Quantum computing may represent early-stage technology, but the market potential is enormous. And IBM has been a major force towards pushing this next-generation computing development into the spotlight. Actually, they have been focused on this for some time. So, as I’ve laid out, IBM is right at the forefront of the hottest tech segments out there today. I definitely see them as a growth stock, because they have an abundance of knowledge and expertise, a strong free cash flow (reaching 11.9B last year) to support all of their endeavors, and seems to be thriving under Krishna’s new leadership.

In times like these on Wall Street, where huge gains are paired with huge losses, it helps to find a stock that pays their shareholders a great dividend. IBM is one of the few big tech companies that do. This means that it doesn’t matter if the market is up or down for the day, you’re guaranteed to make money on your dividends. And IBM pays the 4th highest dividend of all Dow Jones stocks. On top of that, it has recently become a Dividend Aristocrat. On April 28, the company announced it would be increasing its dividends for the 25th year in a row. The $0.01 means that investors will be earning $1.63 per share every quarter. At a price of around $117, that means the dividend yielding 5.56% per year. Josh Peters said, “Dividends may not be the only path for an individual investor’s success, but if there’s a better one, I have yet to find it.” Checkmark, IBM.

Finally, because of IBM’s checkered past, along with a current balance sheet that raises some red flags, IBM can be bought right now at a nice discount. IBM’s stock hasn’t shown a lot of volatility since early April, which is nice. The company is trading well below its fair value, and it’s PE Ratio is much lower than its industry average, both good signs. Finally, when do you find an iconic tech giant trading at 27.5% below its fair value? I feel that IBM is re-positioning itself as an industry leader in cloud services, which is so vital in businesses moving towards a remote-work model. The company is also at the forefront of other emerging tech segments as well. Wall Street tells a story of IBM as being a stalled business, left behind by the trail-blazing companies named Microsoft, Amazon, and Google. But inside this battered business lies a fantastic long term growth story developing beneath the surface. Because of it, the dividend you receive, and the price you can pay right now, I’m all in on IBM.

Disclaimer: This material should not be considered investment advice. After Further Review…The Stock is Reversed or Bob Schless are not registered, investment advisors. Under no circumstances should any content from this blog, website, articles, videos, seminars or emails from After Further Review…The Stock is Reversed or Bob Schless should be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for speculative purposes only.

Bob Schless Blog writer for After Further Review…The Stock is Reversed afterfurtherreview.online info@afterfurtherreview.online Facebook: After Further Review The Stock Is Reversed Instagram: bobschlessafr Twitter: @schless_bob LinkedIn: linkedin.com/in/bobschless

Tips From Investing Titans To Help You Profit Off The Second Wave Of The Coronavirus

Bob Schless, Insider Monkey June 18, 2020.

“There are no bad days in the market. When the market is down, you’ve got bargains, and it’s lovely to think of what you are buying at low prices. When the market is up, the bargains have gone, but you’re rich.” BRUCE GREENWALD (FIRST EAGLE FUNDS)

Today is one of great opportunities to buy the dip. Overall, I would expect the market to see some big drops along with big gains as investors navigate through the good news and the bad as a result of the impact of the coronavirus on our economy. I fwould never tell anyone to sell their stocks solely on the basis of fear or the negativity you often hear coming from Wall Street. The honest truth is that there are more opportunities to make money in this unstable market than you may think. Here are 8 tips I’ve gathered from some of the most famous investors in the stock market. Whether you’re just getting started investing, going about buying stocks solely based on tips from friends or something you read, are not happy with the results you’re getting from your financial advisor, or are just interested in learning how to tackle the tumultuous market we are entering, this article is for you. Hopefully by reading these sound investment principals, you’ll be empowered to make great decisions in the stock market regardless of how the news of the day affects Wall Street.

Warren Buffett of Berkshire Hathaway[/caption]1. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”-Warren Buffett

Especially now, you want to be investing in established companies that are leaders in their industry. Ones with strong balance sheets, excellent management teams, and a proven track record over time. Companies that offer great dividends are a plus. These are the ones you invest and reinvest in when their prices dip, because you’re assured that whatever happens in the market, they will return to where they left off once the dust has settled. You should not be buying companies just because they are cheap or others are telling you to buy them without doing your due diligence and seeing how their industry has been affected by the virus and their long-term growth potential.

2. “Investors need discipline to avoid the many unattractive pitches that are thrown, patience to wait for the right pitch, and judgement to know when it is time to swing.” Seth Klarman

If you follow the stock market, everyday you’re going to see plenty of news sources pushing stocks as, “The best COVID-19 proof stocks” or, “The next big trend.” Carefully scrutinize everything you read. If a particular company passes your checklist, and you develop a strong conviction about it, sit on your hands and wait. It’s most likely that during this tumultuous time you will find the right time to buy it. In addition, if you own a stock and you see it drop like today, you may want to add to your position in it. And if it drops further, once again this could be a time to add more. This does take having some cash in reserve, which is a smart thing to have while you’re investing in today’s market

.3. I am convinced that all this poverty in Mexico and in Latin America like it’s happening in China is the opportunity to grow. It’s an opportunity for investment.” -Carlos Slim

While playing the market during the coronavirus pandemic, don’t look at what’s happening now when looking at a particular stock. By studying a company’s growth outlook or how/if it’s going to return to pre-coronavirus levels, as well as how it will differentiate itself from its competitors when coronavirus passes and our economy strengthens, you’ll learn the importance of investing for today because of what will happen in the future. This is called forward thinking, and is a very important principle to call upon when the stock market is teeter-tawing from good news to bad news and back.

4. “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.”-Warren Buffett

Don’t be too negative or fearful of the day-to-day happenings of your stocks. If you own stocks in companies in which you believe strongly in, any day that the stock market plummets gives you opportunities to increase your position in them. It also makes for a good time to invest in a company you’ve had your eye on as well. You may have to be extremely patient, which the best investors are, but at the end of the day you want to own stocks in great companies that were close to their 52-week high a few months prior to this past March when the market crashed. If you can’t see anything long-term that would stop them from reaching those levels again, there will be a buying opportunity. If they’ve grown in a new direction giving them additional streams of revenue, again, a buying opportunity. Finally, if the changes in our new economic landscape favors what the company produces, that’s a great signal to buy or add to your position when the price is right. Great buying opportunities come around for these companies, which can make being in this topsy turvy market quite lucrative.

5. “Though tempting, trying to time the market is a loser’s game. $10,000 continuously invested in the market over the past 20 years grew to more than $48,000. If you missed just the best 30 days, your investment was reduced to $9,900.- Christopher Davis

I’ve also heard the catchy phrase, “Time in the market, not timing the market.” This principle of investing is an important one to understand when investing in today’s market. You can’t predict when the good days and bad ones will happen. That is why at times you’ll need to sit on your hands and learn to do nothing for extended periods of time, until a great opportunity presents itself. This can be very hard, because fear and impatience often settles in, and you will probably see opportunities that look more appealing than the stocks you are sitting on. My advice is to not sell out of your positions. Unless you strongly feel that you’ve misjudged a company, or research is telling you that they are going to have a hard time growing due to permanent changes to our economy, stay put. The best returns you can have are when you stay long in your positions, especially when the stock market will have a lot of ups and downs, which is what I’m forecasting. This can be hard, but is prudent. Plus, if you’re buying strong dividend stocks, staying in them you will earn money, whether their prices are up or down. I will touch on this later.

6. “It’s not always easy to do what’s not popular, but that’s where you make your money. Buy stocks that look bad to less careful investors and hang on until their real value is recognized.”-John Neff

I definitely have a contrarian streak in me when it comes to investing. In such, during the coronavirus pandemic, there have been so many appetizing opportunities to buy into great companies at a cheap price. This is due to the short-sighted, doom and gloom rhetoric that often permeates throughout Wall Street during struggling times in America. Some good companies will take a bad rap based on short term issues, and their stock price will take a hit. These out of favor companies are the ones you need to study vigorously. Warren Buffett would have you ask yourself, is this company, “something that you’d be perfectly happy to hold if the market shut down for 10 years.” Don’t look at how a beaten down company fares in the short term. Study these companies and see what will bring them back to their pre-coronavirus stature in the market. If you see a long-term opportunity, forget what people are saying and when the opportunity presents itself, attack. Most people on Wall Street aren’t usually thinking in these terms, so that’s where you gain a competitive edge in the market. Many great investors have made their fortunes going against the public.

7. “Dividend stocks have several advantages, since 1926 dividends have accounted for about 42 percent of investor returns, while being less volatile than the market. To some extent the dividend acts like an anchor, slowing the stock down. The beauty of dividends is that you get paid, whether or not the market is up.”-Howard Silverblatt

Investing in companies that are consistently growing their dividends is a great way to make money in this market, whether their stock is up or down. What you need to know is that a company that has raised its dividend on a consistent basis for many years, and continues to have a massive cash reserves and great cash flow, usually is one that shows earnings’s growth on a consistent basis as well. By owning and holding onto these stocks, and reinvesting in them during tumultuous times in the market, you are setting yourself up for compounding dividend returns at prices that were bought at a discount. And these returns do add up, as much as 42% of investor’s returns. That is huge. John D. Rockefeller said, “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” And Warren Buffett has over 80% of his stock portfolio invested in dividend stocks. I suggest you focus on a handful of these strong dividend companies when looking to add to your portfolio. By doing so, you’ll give yourself an opportunity to earn money as you sleep at night, on good days in the market as well as bad

.8. ” Obsession with broad diversification is the sure road to mediocrity “-John Neff

When it comes to investing, I’d rather own a few pieces of something that is of quality, pays more, and can be monitored more closely than to own a little piece of everything. In today’s unstable market, there’s a lot of money to be made by being an active investor. By owning between 3 to 5 companies at a time that are well established leaders in their industry, you’ll have opportunities to reinvest in them when a major dip occurs. People tout index funds and passive investing because they supposedly mitigate risk and those who don’t have the time to follow the market can still be invested, But factoring in the lower returns for the passive investor, those advantages take a hit. Plus, diversification doesn’t offer you protection from risk when the stock market has a day like it did on Thursday. Just ask yourself, are you better off by owning a larger basket of averageness or a smaller basket of greatness?

In summation, many Wall Street observers had been pleasantly surprised by the market’s strong recovery after the coronavirus decimated our economy,. But days like today show how easily forward progress can get backed up as the second wave of the virus grows stronger. This place of uncertainty in America, in my opinion, is a recipe for increasing volatility in our stock market. By offering you some investing principles and advice that have helped turn people into billionaires, I’m hoping that you will come out ahead when COVID-19 has sailed away and our economy is strong again. Remember, bad news is often positive for those investing in the stock market. The majority of these companies will be profiting at high rates in 5 years or less. So go out and invest with confidence in knowing that an unstable market can be a place of wonderful opportunities and tremendous returns. The waiting will be the hardest part, but the returns will be plentiful.

Disclaimer : This material should not be considered investment advice. After Further Review…The Stock is Reversed or Bob Schless are not registered investment advisors. Under no circumstances should any content from this blog, website, articles, videos, seminars or emails from After Further Review…The Stock is Reversed or Bob Schless should be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for speculative purposes only.

Wells Fargo & Company (WFC) $27.40

This is Wells Fargo: And Wall Street Has Shunned It.

       

File:Wells Fargo Bank.svg

As COVID-19 has wreaked havoc on our nation’s economy, the bank and financial industry have taken a big hit on Wall Street, partly because of memories of the role they played in the 2008 Financial Crisis that hit investors so hard. Investors have avoided the group for fear the recession will crush profitability and result in rising loan losses. XLF, the financial select sector SPDR Fund, is down 11.26 over 3 months and 22.45 year-to-date. Unfortunately, banks and financials are the “canary in the coal mine” for the health of the economy,  and they have lagged every sector but energy since the market low in March.

       While the coronavirus pandemic has taken a toll on bank stocks across the U.S., Wells Fargo’s drop is the steepest among its main peers this year. Over the past 3 months, the company’s stock is down -32.40%, YTD it is down -49.07% and over a 1 Year period it has lost -38.25%. Wells Fargo’s stock hit an 11 year low of $22.00 May 13, 2020. The Federal Reserve imposed an unprecedented cap on the firm’s assets in early 2018 due to its fake accounts scandal, making it difficult for it to add customers and loans, because it has lost $220 billion dollars in stock-market value since then. The mistakes involving a hit on customer trust were indefensible, and the public has placed a large cloud of disdain over Wells Fargo. Because of this, investors find it almost distasteful to carry a long position in Wells Fargo stock.

       Wells Fargo has a large loan portfolio of around $399 billion in community loans and $456 billion in commercial loans (as per 2019 data). Adding to that,  the community and commercial banking segments together generated around 72% of the bank revenues in 2019, which implies that the bank is heavily dependent on the two segments. With unemployment exceeding 40 million Americans, and many businesses stretching their finances very thin to stay intact, this could very well impact the loan repayment capabilities of both commercial and community banking customers, making Wells Fargo a candidate for the possibility of major losses.  

On top of this, on May 6, UBS reduced its forecasts for earnings at the bank in 2020 and 2021 by 47% and 24%, respectively. Overall, UBS trimmed forecasts at large and regional banks by 25% in 2020, on average, and 18% for 2021. Finally, on May 15, Analysts at Keefe, Bruyette & Woods listed 21 banks they say are “potential dividend cut candidates.” They believe that Wells Fargo is the largest potential candidate listed for a dividend cut, the only “universal bank” on the list.

Warren Buffett “Be Greedy When Others Are Fearful”

       Wells Fargo has been through crises before. The bank has weathered events like the 2008 financial crisis, coming out with their stock by late 2009 almost tripled by the crisis lows. The fake accounts scandal that saw it severely punished by the Federal Reserve in 2018 was not a punishing blow, as the stock reached a 52-week high of $54.75 on November 29, 2019. I see no reason this won’t happen again. Bireme Capital recently released its Q1 2020 Investor Letter, and it stated that they estimate that Wells Fargo will be able to generate about $15-$18 billion of profits per year, only slightly lower than the $18-$20 billion they generated between 2017-2019.

       I read an amusing headline recently From InvestorPlace contributor Tyler Craig, saying, “Wells Fargo Is the Ugliest Bank Stock on the Planet. If this was true, why would the “Oracle of Omaha,” Warren Buffett, have the stock as his fifth largest holding in his portfolio. Furthermore, Buffett is loaded with bank stocks, giving the sector credibility and confidence in its direction moving forward. Let’s not forget that Wells Fargo has been around for 168 years, and is the fourth largest bank in America. Wells Fargo has the ability to absorb more losses and still come out of it comfortably on the other side. Plus, they have stashed away millions of dollars, while they are being smartly prudent about giving out mortgage loans and home refinancing to consumers, and car dealerships on the commercial front.

                                                  

      On Feb 11, Wells Fargo & Co Chief Executive Charles Scharf announced his first major reshuffle on Tuesday, promoting several executives to new roles while also tapping a JPMorgan veteran to head consumer lending.The shakeup is aimed at putting a new structure in place as the bank looks to rebuild its reputation and increase accountability, the bank said in a statement. The new structure is reminiscent of JPMorgan Chase and, no surprise, Scharf is a former executive with that bank. He was quoted as saying, “I firmly believe we have a great future in front of us. We have a group of businesses that are the envy of the industry. We have great market positions in an industry that will continue to grow as we enable our customers to succeed financially. We can and will do the work necessary to create the right environment inside the company to allow us to grow successfully. We know we have some challenges in front of us. I feel very confident that we know what we have to do, and we will get it done.

       Finally, there are certain factors when looking at the economy that should bode confidence that Wells Fargo will not be cutting their large 8% dividend. First, the $2 trillion Coronavirus relief package that most Americans were a part of gave them extra money to keep afloat for sometime. Also, the unemployment checks that some are receiving are larger than their typical weekly paychecks. Finally, Americans are putting more money into savings than ever before. This should help banks collect loans and make Wells Fargo dividend payment to shareholders for the most part secure. 

       In summation, I see Wells Fargo as being currently undervalued. As the economy is starting to open up, banks will be a vital part to its success. When buying Wells Farago stock, you are buying them on the cheap. This is a well established company that offers a huge dividend to its investors. They have a new management full of years of experience working at top banks in our country. They should be able to move Wells Fargo forward. I must say that this is a stock for long term patient investors, who can wait about five years to collect on financial gains. You need to look past the short term of bad behavior and COVID-19 to see that Wells Fargo will rise again. And the time to invest is now.

       Disclaimer : This material should not be considered investment advice. After Further Review…The Stock is Reversed or Bob Schless are not registered investment advisors. Under no circumstances should any content from this blog, website, articles, videos, seminars or emails from After Further Review…The Stock is Reversed or Bob Schless should be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for speculative purposes only. 

American Express (AXP)$83.17

“Don’t Leave Home Without It.” We’re Not Leaving Home.

       American Express is down 40% off its10 year high of $138.13, achieved just 3 months ago. WOW!!! This is a company that got knocked hard to the ground by the Coronavirus. But will it rise back up anytime soon? Let’s take a look. 

Why the sell off? 

       AmericanMembership Rewards® program centerpiece is Travel and Entertainment, such as generous point/miles awards for qualifying purchases, airline ticket credits, reimbursement for safe traveler program enrollment fees, high-end airport lounge access, perks connected with hotel chains, superior customer service while traveling domestically and around the globe, dining points, VIP event experiences and more. Unfortunately for the company, “T&E, which was roughly 30% of our proprietary volumes in 2019, is down almost 95%”, Chief Financial Officer Jeffrey Campbell said on Friday. 

       There are other glaring concerns facing American Express regarding the impact it is having on its core business. We’re looking at a world where people don’t go to work, they use Zoom and work remotely at home, This puts into question what business travel might look like in America post COVID 19, and is an area where American Express have had an upper hand vs. its competitors. Also, by American Express having a no preset spending limit, the rising rate of unemployment could force customers who made large purchases unable to pay them back. When American Express members are unable to pay back their balances in full from month to month, the company charges them large penalty fees which help the company make money. This avenue of revenue is going to be depleted due to the hit our nation’s economy is taking during the COVID 19 pandemic. On top of this, American Express, unlike Visa and MasterCard, is a lender. With small businesses getting decimated by the stay-at-home orders in place around the country, a number of loans provided to them by American Express will be hard for them to recover. This goes for personal loans as well. Finally, American Express has always forced merchants to pay a higher transaction fee for those using the credit card to pay for purchases. These merchants would accept this, feeling that the American Express customer was a more affluent one. Now, there will be less businesses willing to pay this extra fee, thus being less places accepting American Express for payment.  

       When looking at all of these negative circumstances that the Coronavirus has dealt American Express, I still believe in their business. Behind the scenes,  American Express is shifting its current focus towards on-line shopping, food delivery, and grocery delivery. They have the money to survive COVID 19’s financial hit and will have more Rewards to offer card members after a vaccine is found. People will travel again, and will welcome back the awards American Express gave to them. There will still be the need for business travel as well.  American Express is providing financial aid to its members and other people affected by COVID 19 in ways that will build a positive image for its brand and strengthen customer loyalty. They also have airline and hotel connections that our government is providing financial aid to, and once the dust settles, these companies will flourish once again, while smaller outfits may be wiped off the mat, giving them a stronger competitive edge. 

       Warren Buffett, the most famous value investor of our time, owns close to 19% of American Express stock, recently said in an interview. “We’re buying businesses to own for 20 or 30 years,” Buffett, who Forbes estimates has a net worth of $87.3 billion, said on CNBC. “We think the 20- and 30-year outlook is not changed by the coronavirus.  

       This might be your chance to buy some stocks in a strong and well-established company like American Express at prices you may never see again. Keep in mind, “Membership Has Its Privileges”. 

COVID 19 and how American Express is dealing with the effects of the pandemic  

Reducing Costs 

       Credit card issuer American Express Co (AXP) said on Friday it would cut spending by nearly $3 billion in 2020 after its quarterly profit sank 76% as it set aside more money to brace itself against a wave of potential delinquencies.  

       Stephen Squeri, chief executive at American Express “As we manage through this period, we’ll remain focused on what we can control in the short term while keeping an eye on the long term. In light of the current environment, we are aggressively reducing costs across the enterprise,”  

       The company expects operating expenses to be down about $1 billion year over year during the next three quarters and will “dramatically” reduce its marketing efforts, company executives said on a post-earnings call. 

       Oftentimes when a company finds ways to tighten the screws on its operations, they come out with new avenues to increase profits and production with less fat. This is what I feel is happening here because American Express is battle tested, strong and innovators. What’s best is that reduction costs do not involve any layoffs. 

Helping those affected by COVID 19 

       Recently, American Express said it will set aside $2.6 billion to protect against potential card losses. In a company statement, they wrote, “ As you know, the situation is changing rapidly, so our approach to providing the best possible support and service to our customers is also evolving in real-time. We will work together to find a solution for each customers’ particular situation, which can include waiving late fees, return check fees, and interest charges. We have several financial hardship programs offering a range of short-term to long-term assistance”.  

       American Express seems to be willing to waive late fees, waive interest charges, refunding returned check fees, and reinstating forfeited rewards. The company is also working with cobrand partners and its own travel platform to extend credits, refunds and rebooking.  

       The company is finding other ways to give help to those impacted by the Coronavirus pandemic. On April 6, Hilton (NYSE:HLT) and American Express (NYSE:AXP)  announced that the companies, in partnership with Hilton’s ownership community, will donate up to 1 million hotel room nights across the United States to frontline medical professionals leading the fight against COVID-19. American Express is also waiving the annual fees on all their personal cards, including the $550 per year AMEX Platinum, for active duty military servicemembers and spouses.                              

       Finally, Amex was the first credit card issuer to extend the timeframe for earning a welcome bonus. If you open an American Express Card, you generally have three months to meet the minimum spending requirement to earn the welcome bonus of points or cash back. Now, you could take up to six months to meet the minimum spend if you applied for your new card between December 1, 2019 and May 31, 2020. 

This is great news if you were struggling to meet a welcome bonus spending requirement in three months, or if you’ve been eyeing a card with a very high spend requirement that could be doable in six months. For example, The Business Platinum Card from American Express is offering 75,000 points to new cardholders who spend $15,000. You normally would have just three months to meet that requirement, but now you can take six months, averaging out to $2,500 in spending per month. 

Brand Image, Loyal Customers, and Great Customer Service…A Recipe for Success  

       Acts of good faith and adding strong initiatives play a big part towards attracting an inflow of new card members. This is my belief. And American Express has done an excellent job in both of these areas. They’ve shown a tremendous amount of empathy and care towards its card members who may have fallen on hard times due to the virus, and towards those on the frontline helping to save lives. This show of altruistic acts during this pandemic is in the news. And those looking for a credit or cash card will take notice. In my mind, it gives American Express a leg up on the competition. 

       American Express has always been known for its customer loyalty. The average cardholder spends three times the number of other cardholders, and they are loyal — attrition rates didn’t change during the Sept. 11, 2001, terrorist attacks or the financial crisis. With their emphasis on quickly making a wrong a right, and through their outstanding customer support, their members are given a sense of trust and security which makes it a card they will hold on to forever. And the level of care the company has shown towards those who are now struggling to make ends meet during the virus will only strengthen this relationship. Although American Express has fallen on hard times, members know that this will eventually pass over and this will be their card of choice again for travel and entertainment.   

       American Express prides itself on giving an exceptional customer service experience. They have a highly efficient customer care team to handle the queries and complaints of their customers and to provide them with satisfactory solutions within a reasonable time frame. Customer service, in my eyes, will be key for credit or charge card companies as we continue through COVID 19 and its aftermath. Americans will be overly observant towards every dollar they spend, and more of it will be on credit or charge cards. Plus, there should be an uptick on scams and other fraudulent activity taking place with our financial purchases. I’m pretty confident that American Express will be one of the leaders in customer care, and this will go a long way towards earning the trust and overall satisfaction with the company. 

A Change in direction from Travel and Entertainment to Stay at Home Rewards and Usage…Changing Today With A Promise Towards a Better Tomorrow. 

       The AmericanMembership Rewards program is having a makeover, keeping travel and entertainment benefits it’s known for, but now putting an emphasis on stay at home food and grocery delivery services. This is a smart move, at a time when this is where consumer spending is going, while travel and entertainment is shut down. And they are doing a fine job with this transition so far.  

       Amex gold card One of the most rewarding options for ordering delivery, both in terms of benefits and rewards. The Amex Gold isn’t just a pretty card. Its 4x earning rate on dining worldwide and at U.S. supermarkets makes it a strong pick for pretty much all food purchases. The $220 in annual statement credits — between the dining credit and the airline fee credit — add value, and also make the $250 annual fee easier to swallow. The welcome bonus doesn’t turn heads, but the American Express Gold Card still earns a spot as one of the best cards and can rack up plenty of points for those with appetites for dining out or dining in, travel perks and dining out for long term growth, and food delivery and shopping delivery short term growth. You’re basically getting a 6.8% return at restaurants globally and at U.S. supermarkets. This beats the Chase Sapphire Reserve when it comes to dining. 

       American Express has revealed that in early May they’re planning “actual product refreshes to a number of products, which will infuse additional value in addition to the value that a card may have.” This should include adding “a range of limited time offers, credits, and rewards on stay-at-home services, such as wireless, streaming, grocery, and food delivery for consumer and certain co-brand card consumers, as well as business essentials like wireless office equipment and shipping for small business consumers”. 

       On top of this, there are excellent travel and stay at home rewards for American Express Platinum Members. Not only does this card offer great purchase protection, but it also comes with offers that can save money or earn bonus rewards when you shop online. 

       For instance, when you typically see deals for saving money with travel brands like Hilton and Marriott, lately the offers on my on this card have been more geared toward life spent close to home. For example, American Express is giving you $30 back on purchases of $100 or more at Wine.com. Also, they are offering one additional point per dollar on Grubhub and Seamless food delivery purchases. Other nice perks come with their relationship with Uber, where Platinum Card Members are earning Uber Eats points. I see this relationship as being a strong long term one, as more people will be working from home,  will need to sell their cars due to financial hardship, or will still be apprehensive to leave the house as a result of COVID 19, thus seeing a surge for the need of Uber and Uber Eats in everyday life once a cure is found.  

       Finally, American Express is a great choice when you shop on Amazon. First off, Amex Everyday Preferred cardholders earn 50% bonus points every billing period when they charge 30 or more purchases to the card. So, if you charge at least one purchase per day on the Amex Everyday Preferred Card, you’ll essentially earn at least 1.5 points per dollar spent.  Next, The American Express Platinum Card offers purchase protection for up to 120 days from your date of purchase, with a maximum of $10,000 per claim and $50,000 per account per year. Finally, Amex card members receive Amex offers. These are deals for bonus points or cash back when you shop with a specific retailer. There are frequently Amex Offers for bonus points on Amazon purchases. 

       So as you can see, American Express has been aggressively finding ways to offer great Cash Back Rewards for the stay at home and social distancing world that we have been forced into. This should make them one of the top cards of choice for those trying to get discounts on food and grocery delivery and online shopping, which is in high demand these days. And because more and more people will be having to use credit or charge cards to make purchases due to the recession as a result of the Coronavirus, I see the direction the company is going towards current consumer spending as a way to offset the business losses in their travel and entertainment sector. Finally, once a vaccine is found and society returns back to some kind of normalcy, American Express cards are going to be more desirable, whether you love to travel and dine out, or prefer to stay in and live your lives in the comfort of your own home. 

Final Thoughts 

       The Coronavirus has rocked the financial world, and American Express has been particularly affected because of its emphasis on travel and entertainment. Investors also believe that there will be far less people who can afford to have it in their financial portfolio. Investors see it is as popular with small businesses and business travel, both that will have a whole different reality once COVID 19 ends its path of destruction. Finally, American Express is a lender, and investors worry about the amounts of money they will fail to recoup due to the recession we’re in and will be in for sometime. 

       I look at these worries and I see promise, because of who American Express is as a company and what they are doing to change their brand during the Coronavirus pandemic. The company is built on trust, customer loyalty, and customer service. This will all come into play during this time of our lives, when protecting our money and our purchases will mean more than ever. Moving their emphasis away from Travel & Entertainment and into food and grocery delivery and online shopping is a smart move, one which was done as a necessity in the short term, but will add great value to the brand in the long term. People will be travelling and dining out at some point, and when this happens Amex becomes a card of choice. But now, there will be other great benefits for when they want to stay in and relax. The options for card holders to earn rewards will be wonderful, helping American Express to become a more diversified business.  And who has been your typical American Express Member? One who is typically a higher earner as opposed to those you’d find owning other credit cards. So, I don’t see American Express dealing with customers who can’t pay off their charges or loans as a result of COVID 19 as I do see other card companies struggling for credit card payments because of it.   

       “American Express has a long runway to deliver strong, long-term performance, driven by our differentiated business model and our focus on our strategic imperatives,” said Stephen J. Squeri, Chairman and Chief Executive Officer. “We have a long track record of navigating through uncertain economic periods by focusing on our disciplined operational and strategic execution, our dedicated colleagues, and the deep relationships we have with our customers and partners. We will continue our strategy of investing in share, scale and relevance, and we are focused on running the company for the long term.” 

       I’m bullish on American Express, but I think it will take a patient investor to buy stock in it and see it get towards the ten-year high level we saw in January 2020. But those numbers are there, and with shares currently at a 40% discount from there, I must ask myself, “Why aren’t I buying now”? 

“Blue Skies, Smiling at me, Nothing but Blue Skies, do I See”.-Willie Nelson 

Disclaimer: This material should not be considered investment advice. After Further Review…The Stock is Reversed or Bob Schless are not registered investment advisors. Under no circumstances should any content from this blog, website, articles, videos, seminars or emails from After Further Review…The Stock is Reversed or Bob Schless should be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.