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5 Investment Ideas From Wall Street: Jan. 30

NEW YORK ( TheStreet) -- In today's daily series, analysts weigh in on how to picks stocks in tough sectors like financials and media:

1) Credit Card Stocks the Way to Go

Competition in the credit card industry is still fierce. But could signs of stabilization in pricing make room for investment opportunities?

"With the Fed on hold until at least late 2014, we continue to like the positioning of the card companies relative to other financials," writes Citigroup.

December mail volumes were light but Citigroup notes that for the full year, mailings were up 37%, perhaps due to a marketing ramp up, in particular online advertising.

Citigroup's top pick is Capital One Financial (COF - Get Report), which it says trades at 6.4x its estimate for 2013. "While COF's fourth quarter results were disappointing given the higher expense trend, we view it as largely offensive in nature and supportive of future loan growth. And we like COF's overweight position in the high ROE card business."

The McLean, Va. Based lender recently reported earnings of $407 million, or 88 cents a share for the fourth quarter, missing the estimate of $1.56 a share by analysts polled by Thomson Reuters. The company said that the sharp increase in noninterest expenses was mainly due to a seasonal ramp in marking expenses and as well as an increase in operating expenses including a $90 million litigation expense.

However, one positive in the company's latest earnings was that total loan balances increased 5% sequentially and 8% year-over-year to $135.9 billion as of the end of December. Credit card balances grew 6% year-over-year to $65.1 billion. Commercial loans grew 14% to $34 billion.

Overall sentiment from analysts toward the company is strong as Capital One heads into a huge transition after two major acquisitions. 15 out of 20 analysts rate the shares a buy, while four analysts have neutral ratings, and one recommends selling the shares.

Citigroup's second pick in the credit card space is American Express (AXP - Get Report). The company, which reported fourth quarter results on Jan 19, saw earnings rise 12% as cardholder spending rose. U.S. card loans grew 4% from a year ago to $53.7 billion and cardholder spending totaled $3,933 on average during the quarter, up from $3,629 a year earlier, according to the report.

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