American Express’ 2019 fourth-quarter earnings, announced late last month, beat Wall Street expectations.
With the company’s adjusted annual profit coming in 12% higher in 2019 than in 2018, that was good news for the company and for shareholders.
If you invested $1,000 in the financial institution 10 years ago, your investment would be worth more than $4,000 as of Feb. 18, for a total return of 301%, according to CNBC calculations. By comparison, in the same time frame, the S&P 500 had a total return of just over 275%. American Express’ current share price was slightly above $129 on Monday, down more than 4% in morning trading amid growing fears of the economic effects of coronavirus.
While American Express’ shares have done well over the years, past performance is no sign of future results.
CNBC: American Express’ stock as of February 2020.
How American Express got its start
American Express dates to 1850, when it started as a freight shipping company. The company began introducing financial products and services and by the 1950s, Amex launched its first consumer charge card.
In 1966, it put forth a corporate card program for businesses, and in 1991, created its first loyalty program, now called Membership Rewards. The program serves to incentivize users with benefits and encourage member loyalty.
Since then, American Express has continued to reiterate its financial offerings by introducing lines of debit and credit cards as well as banking services. Today, it’s one of the world’s largest financial corporations with more than 63 million cardholders.
American Express’ stock performance
Through the years, American Express stock gone up and down.
Like many financial institutions, the company saw its stock sink around the time of the 2008 recession. By February 2009, its share price landed at just over $11.
In February 2015, the market value of American Express fell by around $8 billion within 48 hours after it announced the loss of a lucrative contract with Costco, which was set to expire in March 2016. The contract termination had shareholders worried about how much revenue Amex would lose and how it would impact their investments.
In October 2017, it was also announced that Kenneth Chenault, chairman and CEO for 17 years, would step down in February 2018 as American Express struggled to find its place in a modern market.
Despite the problems, Amex stock returned 5.4% annually under Chenault’s tenure. That’s close to double the 2.6% annual return of the financial sector during that period.
The latest on American Express
American Express attributed its Q4 success to the “well-balanced mix” it’s been able to strike between spending and fee and lending revenues. The card issuer reported that nearly 70% of new card members in 2019 went for fee-based products, which helped to grow card fee revenue by 17% last year.
Millennials are also big fans of Amex. In January, CNBC’s Jim Cramer credited young people with helping the company reach its better-than-expected quarter. “Millennials are really signing up, 50% of the new cards. That business is great,” Cramer said during a “Mad Money” lightning round.
This month, Amex also announced a new reservation booking tool for Platinum and Centurion members. The feature will allow cardholders to browse, book and manage reservations all in one place using their mobile device. And eligible users can make multiple reservations per day at over 10,000 restaurants worldwide.
If you are considering getting into investing, experts, including Warren Buffett, often advise starting with index funds, which hold a basket of companies. Because index funds aren’t tied to the performance of a single business, they’re less risky than individual stocks, making them a safer choice for beginners.
Here’s a snapshot of how the markets look now.
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Bitcoin tumbles 5.5% to $53,436
Bitcoin plunged 5.5% to $53,435.9 at 22:04 GMT on Friday, losing $3,112.06 from its previous close.
Bitcoin, the world’s biggest and best-known cryptocurrency, is down 22.6% from the year’s high of $69,000 on Nov. 10.
Ether, the coin linked to the ethereum blockchain network, dropped 6.81% to $4,208.68 on Friday, losing $307.35 from its previous close.
(Reporting by Shivani Tanna in Bengaluru; Editing by Anil D’Silva)
Toys prove to be better investment than gold, art, and financial securities – Phys.Org
Unusual ways of investment, such as collecting toys, can generate high returns. For example, secondary market prices of retired LEGO sets grow by 11% annually, which is faster than gold, stocks, and bonds, HSE University economists say. Their paper was published in the Research in International Business and Finance journal.
According to a survey by Barclays, rich people invest about 10% of their wealth in jewelry, art, antiques, collectible wines, and cars (in addition to traditional investment in financial securities). Demand for such goods is particularly high (as is growth in their prices) in developing countries, such as China, Russia, and Middle Eastern countries. These alternative investments are well-studied, unlike more unusual goods whose purchase might seem less serious: LEGO sets, Barbie dolls, superhero minifigures, or model cars and trains.
Victoria Dobrynskaya, one of the study’s authors and Associate Professor at the Faculty of Economic Sciences
‘We are used to thinking that people buy such items as jewelry, antiques or artworks as an investment. However, there are other options, such as collectible toys. Tens of thousands of deals are made on the secondary LEGO market. Even taking into account the small prices of most sets, this is a huge market that is not well-known by traditional investors.’
There may be several reasons for the rapid growth in the price of the sets. First, they are produced in limited quantities, particularly special collections dedicated to iconic films, books, or historic events. Second, after sets are retired, the number of them available on the secondary market is not large: many owners don’t see value in them (and lose or toss parts), while others, on the contrary, value them and don’t want to sell them. Third, LEGO sets have been produced for several decades and have a lot of adult fans. It would be reasonable to assume that the more time has passed since the set was manufactured, the more it would be valued as a classic sample or a nostalgic object. However, there had been no academic studies to substantiate this assumption.
The authors of the paper looked at the prices of 2,322 LEGO sets from 1987-2015. The dataset included information on primary sales and online auction transactions (only sales of new unopened sets were selected). Secondary market prices usually start to grow two or three years after a set is retired, but there is a significant variation in returns ranging from -50% to +600% annually. Prices of small and very big sets grow faster than prices of medium-sized ones, probably because small sets often contain unique parts or figures, while big ones are produced in small quantities and are more attractive to adults. Prices of thematic sets dedicated to famous buildings, popular movies, or seasonal holidays tend to experience the highest growth on the secondary market (the most expensive ones include Millennium Falcon, Cafe on the Corner, Taj Mahal, Death Star II, and Imperial Star Destroyer). Another attractive category includes sets that were issued in limited editions or distributed at promotional events: rarity increases their value from the collectors’ perspective.
Average returns on LEGO sets are 10-11% annually (and even higher if the new set was purchased on the primary market with a discount), which is more than stocks, bonds, gold, and many collectible items, such as stamps or wines, yield.
In addition, LEGO prices are weakly dependent on the stock market (they were growing even during the financial crisis of 2008) and are relatively low in comparison to art, antiques, and cars, which makes them a reliable and accessible method of investment. However, the authors of the study say that investment in LEGO is worthwhile only in the long term (i.e., over three years) and incurs higher transaction costs (e.g., delivery and storage) than investment in financial securities.
‘Investors in LEGO generate high returns from reselling unpacked sets, particularly rare ones, which were produced in limited editions or a long time ago. Sets produced 20-30 years ago make LEGO fans nostalgic, and prices for them go through the roof. But despite the high profitability of LEGO sets on the secondary market in general, not all sets are equally successful, and one must be a real LEGO fan to sort out the market nuances and see the investment potential in a particular set,’ Victoria Dobrynskaya said.
Victoria Dobrynskaya et al, Lego: The Toy Of Smart Investors, Research in International Business and Finance (2021). DOI: 10.1016/j.ribaf.2021.101539
National Research University Higher School of Economics
Toys prove to be better investment than gold, art, and financial securities (2021, December 3)
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Toronto index turns negative as pot producers weigh
Canada‘s main stock index erased early gains to trade lower on Friday, mirroring the mood on Wall Street, as losses in pot producers eclipsed firmer energy stocks and gains in Bank of Montreal after it reported upbeat earnings.
At 10:00 a.m. ET (15:00 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was down 70.91 points, or 0.34%, at 20,691.12.
Leading the declines, the healthcare sector dropped more than 2%. Losses were concentrated in pot producers Cronos Group Inc, Canopy Growth Corp, Tilray Inc, all of which fell nearly 5%.
The energy sector gained 1.0%, drawing support from a near 3% jump in oil prices after the producer group OPEC+ said it could review its production hike policy at short notice if oil demand collapsed due to new lockdowns. [O/R]
Bank of Montreal added 3% as its quarterly earnings topped market expectations and the lender joined rivals in raising its dividend and announcing a share buyback program.
The benchmark equity index was on track for its third straight weekly loss as sentiment this week took a hit from fears sparked by the new Omicron coronavirus variant.
“We don’t know what’s going to happen, if it (Omicron variant) worsens and if we start to see more restrictions coming and lockdowns, then that could obviously have a negative impact on the market,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.
On the economic front, the Canadian economy added a net 153,700 jobs in November, beating expectations, and the jobless rate slipped to 6.0% from 6.7% in October, Statistics Canada said.
The TSX posted no new 52-week highs and five new lows.
Across all Canadian issues, there were three new 52-week highs and 31 new lows, with a total volume of 54.40 million shares.
(Reporting by Amal S in Bengaluru; Editing by Aditya Soni)
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