Tired Of Volatility? Consider This Safe-Haven Stock
It’s been hard out there for traders this year.
In the past few months, the markets has had to deal with skyrocketing inflation… the Federal Reserve’s reveal of its aggressive plan to increase interest rates… and the ongoing threat of war in Ukraine.
It’s no surprise then that every major U.S. index turned in a negative January. In fact, the Nasdaq just narrowly avoided recording its worst January ever.
Actually, let’s take a look at how some of the individual stocks that comprise the Nasdaq have fared…
– Over the course of a single year, Peloton (PTON) fell from a high of $157 down to $22.
– BigCommerce (BIGC) went from $92 last February to $25 two weeks ago.
– DraftKings (DKNG), which was trading around $65 just five months ago, is now priced in the low $20s.
But that’s not the scariest part. Some of the overnight drops we’ve seen in the past few weeks have been especially alarming…
– After its most recent earnings report, Netflix (NFLX) fell from $508 to $397 overnight.
– PayPal (PYPL) collapsed from $175 to $132 overnight.
– Meta (FB) dropped from $323 to $238 in less than 24 hours.
This ongoing volatility and generally sour market has investors looking for safety.
AXP: Dow’s Best Performer Is Our Pick This Week
That’s great for safe-haven stocks like American Express Company (AXP), which offers a solid balance sheet, conservative fundamentals, and a strong dividend.
American Express has more than 100 million cardholders who charge over $1.1 trillion a year.
The company notes that these cardholders spend more money, on average, than any other credit card holders. According to their research, Cardmembers spend on average 43% more than non-Cardmembers and have higher-than-average incomes. These are the consumers who are likely to spend even in times of economic struggles.
The company makes money from annual fees that are among the highest in the industry, starting at $150 a year and running all the way up to a $7,500 initiation fee of $7,500 for its Amex Centurion black card.
American Express also generates revenue merchant fees, which at 2.5% to 3.5% are generally more than merchants pay to accept Mastercard or Visa. Analysts believe that American Express’s cardholders tend to be more affluent and buy more than Visa and Mastercard customers.
All told, American Express was conservative when it came to planning for the impact of the coronavirus — more than doubling its provisions for write-offs of delinquent accounts. And the company has been rewarded for its smart planning, beating top- and bottom-line estimates in the majority of quarters since the pandemic began.
The company’s strong financial performance also includes its most recent earnings results, which were reported January 25. For the quarter, American Express generated $12.1 billion in revenue — due in large part to an increase in cardholders’ average loan balance — beating Wall Street predictions by an impressive 5.2%. Earnings per share (EPS) of $2.18 also crushed the consensus estimate of $1.87 — a beat of 16.6%.
In terms of technical analysis, AXP is currently the best performer in the Dow right now, showing strong relative strength during the broader market’s recent period of weakness. If we continue to see a shift into safe, blue-chip stocks, AXP could end up being a market leader for 2022 as traders move from aggressive positions to more conservative strategies.
On top of everything else, the stock just recently flashed an Income Trader Volatility (ITV) “buy” signal.
How I’m Trading AXP Stock
If you’re interested in this stock, you could buy shares of AXP and hopefully catch some upside.
But I found a better trade… One that allows my subscribers and I to collect 1.6% in income in just 38 days. That’s a respectable 15% annualized. And all without buying a single share of the stock.
How are we doing this at Income Trader? By using a high-income, short-term put option on AXP.
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