During a Fox News appearance two and a half years ago to promote my book
Have More Money Now , I was pitted against a very pretty bank analyst, Meredith Whitney. It turned out she was a beautiful pit bull, and she attacked me for recommending Citigroup ( C - Get Report). "How can you pick a financial in a rising rate environment?" she asked defiantly. I looked back at her, tried to make my case, and realized deep down I really just wanted to choke her. Well, Citigroup turned out to be a pretty good pick, and then I really showed that analyst (without resorting to violence) -- I moved to New York and married her. We still argue over stocks, but now over wine and a nice dinner. Today, I have another pick in a rising rate environment, and yes, it is a financial: American Express ( AXP - Get Report). click here .
However, American Express is a much bigger story than that. I promised you the best stock on the Dow, and I am going to show you why this is one that could double market share in the next few years Until the fourth quarter of 2004, Visa and MasterCard, with their 90% market share, had prohibited member banks from offering American Express cards, which had just over a 4% market share. This ban helped create a duopoly for the two major card marketers: MBNA and Citigroup had 28% of the credit card market, on the basis of receivables with over 200 million accounts. In 2001, the Justice Department ruled that banks could offer the American Express cards to their customer base. In the fourth quarter of 2004, the Supreme Court refused to hear a challenge from Visa and MasterCard. Since then, American Express has signed an agreement to market its cards through MBNA, Citigroup and UBS Juniper. Its market share is predicted to be around 6% by the end of 2006. American Express has room to grow in the high-end market it currently dominates, but the real story is the ending of Visa and MasterCard's duopoly. The company's future growth -- and why this is the best Dow stock -- is through the new distribution channel it has to market its cards. With a 30% return on equity and a forward multiple of 16 based on future estimated earnings of $3.10, this is a great buy right here. The potential to double market share and a projected growth rate of 20% makes this the perfect Christmas gift. American Express has only 10% of profits coming from spread lending, hence it's making money in a rising rate environment. Because my wife works on Wall Street, I can neither buy nor sell financials that she covers; therefore, I do not own American Express.
I am like a dog on a sunny day looking out the window at the park and not able to go play.
recent article recommended Turkcell ( TKC - Get Report) because of my recent visit to Afghanistan, and the effect a democratic presence in the region would have on capitalism and the ability to make money. I went on to say that, with the consolidation in the cell-phone industry, Turkcell would be a great takeover play. The day the article came out, there was a takeover play in Turkey's cell-phone market; it just wasn't Turkcell. Instead, Vodafone ( VOD), another one of my picks, won an auction to buy Telsim. One of the knocks against Vodafone was that it was paying too much for 3G licenses. Now the same thing is being said about its Telsim purchase. The Turkish government had estimated the value of Telsim at $2.8 billion; Vodafone paid $4.55 billion. I believe Vodafone bought the wrong company; it should have bought a cell-phone company that made money, like Turkcell. It should not have bought a cell-phone company that has a third of Turkcell's subscribers and that won't make money in the near term. The Vodafone-Telsim combination does create more competition for Turkcell, but I still like the company. And I still own my shares of Vodafone, despite a decline in its share price. I believe Vodafone is in a great position due to its large subscriber base and the 3G license that it owns. But I don't feel the Telsim acquisition was the best way to spend its money.