If any investor has stood the test of time, it is Warren Buffett. For years, the “Oracle of Omaha” has had a rock-star-like presence in the investing world. His annual Berkshire Hathaway shareholders meeting draws literally thousands of loyal fans who are investors. Known for his long buy-and-hold strategies and his massive portfolio of public and private holdings, Buffett remains one of the preeminent investors in the entire world.
While many across Wall Street thought the Federal Reserve might tap the brakes Wednesday on increasing the federal funds rate, the reality is that inflation is still soaring, despite the bank liquidity issues and the possibility for continued contagion. The 25-basis-point increase moved the funds rate to 4.75% to 5.00%, the highest since 2007. While many businesses are negatively affected by the increases, some benefit in a big way.
Major money center banks and credit card companies are winners as interest rates creep higher. Banks benefit as interest rates and bank profitability are connected. When interest rates are higher, banks make more money, by taking advantage of the difference between the interest banks pay to customers and the interest the bank can earn by investing. Credit card companies also can benefit, as variable-rate credit cards change the rate customers are charged when rates go higher, as credit card interest rates are based on the prime rate, which is close to the federal funds rate. Rates on cards currently are the highest in decades.
Warren Buffett’s Berkshire Hathaway owns six top companies that will be beneficiaries of the rising rates. All are rated Buy across Wall Street and pay reliable dividends to shareholders. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
American Express
This stock has backed up recently and is offering the best entry point since late last year, despite posting solid quarterly results. American Express Co. (NYSE: AXP) provides charge and credit payment card products and travel-related services worldwide. Its products and services include payment and financing products network services accounts payable expense management products and services, and travel and lifestyle services.
The company’s products and services also include merchant acquisition and processing, servicing and settlement, point-of-sale marketing and information products and services for merchants, and fraud prevention services, as well as the design and operation of customer loyalty programs. It sells its products and services to consumers, small businesses, midsized companies and large corporations through mobile and online applications, third-party vendors and business partners, direct mail, telephone, in-house sales teams and direct response advertising.
Investors receive a 1.51% dividend. Morgan Stanley has a $186 price target on American Express stock. The consensus target is $187.05, and shares closed on Thursday at $162.76.
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