TheStreet.com TV Recap: Give Capital One Credit
Typically what happened in 2005 and 2006 is homebuyers took out a loan for 100% of the value of their homes and then took a home-equity loan for 25% of the value.
"So you have 125% of the value in loans, then the house drops 10%, it makes just a great deal of sense to walk away from those," Cramer said. "But you don't want to lose your credit card. If you keep paying your credit card, your [credit] rating goes fine, so Capital One is actually in a pretty good position."
Plus, Capital One is raising the APR on its credit cards, which is "great," Cramer said. With short-term rates coming down and credit cards rate going up, "the net interest margin is just going to be gigantic."
One thing Cramer said he's not happy about is the fact that Capital One threw away $2 billion buying back its stock higher. He owned the stock for his charitable trust, Action Alerts PLUS, but decided to get out of it, breaking about even, because he lacked confidence in its mortgage business.But now that Capital One's mortgage business has been sold, the stock has become "quite an interesting situation," Cramer said. "It's basically a pure play on credit cards, with a steady deposit base where the net interest margin is gaining. "I would be a buyer of this stock here," he said. "That's quite a different view from everyone else."
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV