Kenneth Fisher joins Warren Buffet

Warren Buffet has been interested in American Express Company, which for a long time has been rendering travel management along with providing charge and credit cards.

This Q2 Fisher Asset Management joined Warren Buffet in the stock and the position for Q2 was 6.6 m shares. In Q2 American Express’ revenue increased by 3 per cent as a contrast to last year’s. The company’s earnings increased from 1.10 to 1.15 dollars per share due to a decrease in share count, whilst net income remained unchanged. The numbers of the company have been more or less good for the first few months of 2011 with EPS being 2.07 dollars and 2.22 dollars for 2012. That is 7 per cent growth rate which is not enough to classify AE as a growth rate stock but it is enough to show that the company manages to get down to business.

It is noted that American Express has a tendency to buy back shares since the share count decrease in 2011.  The company has announced that it will return a half of its return on capital to shareholders through a channel of buybacks and dividends. In the beginning of 2012 the buybacks consumed 4 times as much cash as dividend and cash payments. In order for the company to hit analyst targets, it has to grow very little with having a P/E of 12, which will lead to the stock price being undervalued.

This valuation gives away the ownership of 150 m shares by Berkshire Hathaway. Another investor in American Express is Eagle Investment Management, which has reported 9.9 m shares for June 2012. Adage Capital Management has increased its position by 53 per cent for Q2 to 1.5 m shares.

Visa and Mastercard’s P/Es are much above these of American Express – 18 for Visa and 16 for Mastercard. Moreover, they have a small part in Berkshire’s portfolio. Their growth rate was better than that of American Express in Q2 with their revenue being 10 per cent more than it was in 2011. Discover Financial Services has decreased its earnings for Q2 in contrast to 2011. American Express serves as a medium between Discover, Visa and Mastercard since its valuation doesn’t depend on a strong growth rate.