Sunday, December 06, 2009

Credit Cards May Bail Out the Holiday Season

Credit cards have been the source of the seed capital for many businesses that started off small and have since become extremely successful. Larry Page and Sergey Brin, founders of Google (GOOG) supposedly started the company with credit card advances. Hedge fund manager Bruce Kovner and director, producer, writer, and actor Spike Lee also got their start with the help of credit cards, according to Wikipedia.

A variety of credit cards are now available and ubiquitous. And I don't just mean different interest rates and fee structures, or even personalized cards. You can get cars that smell with 90 choices of aromas.

For the average consumer, credit cards may not help with the funding of a business, but the cards will sure help out with holiday shopping. Every time there is a transaction, the card company receives a fee, and although the number and quantity of transactions may not be as much as previous, more robust years, activity this holiday season should be better than last year.

Here are some credit card companies that you might want to charge ahead with.

Discover Financial Services (DFS) is an issuer of the Discover Card, the third largest credit card brand in the U.S, as measured by cardholders. The Discover Card was originally developed by Sears, many years ago. Discover has a forward P/E of 20,has $10.8 billion in cash versus only $1.8 billion in total debt, and pays a small dividend of 0.5%.

American Express (AXP) is the financial conglomerate that offers the famous American Express card, travellers checks, gift cards, gift checks, prepaid cards and merchant services. They also offer banking, investment and travel services. The stock's forward P/E is 17,has $18.6 billion in cash and $55 billion in total debt, and it yields about 1.8%.

MasterCard (MA) went public in May of 2006. Its card brands include MasterCard, MasterCard Electronic, Cirrus, and Maestro. It has a forward P/E of 18, $2.95 billion in cash versus $22 million in total debt, and a small yield of 0.2%.

VISA (V), which also recently went public, has a forward PE of 19, $4.8 billion in cash with only a nominal $56 million in total debt, and pays a 0.6% yield.

Although a smaller play in the credit card industry, Barclays (BCS), the British financial services company, offers banking services, investment banking, and credit cards, primarily the Barclaycard. The stock has a P/E of 7 and a yield of 0.3%.

The biggest alternative to credit cards is Paypal, owned by eBay (EBAY), the online marketplace and auction place. eBay has a forward PE of 15, $3.16 billion in cash versus a picayune $200 million in total debt. They don't pay a dividend.

Maybe your portfolio can get a charge out of credit card companies. Don't leave your portfolio without one.

By the way, if you like companies with lots of cash and low or no debt, check out the free downloadable Excel databases of high cash, low debt stocks at

Author owns EBAY.

By Fred Fuld at

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