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Capital One Financial Corporation Message Board

  • wmsdead wmsdead Mar 13, 2013 1:20 PM Flag

    Post crisis returns: COF v AMX v DFS

    Capital One peaked at about 90 in early 2006. Today's price of 55 is about 35% below those highs. AMX has just reached new all-time highs, recovering all that was lost in the financial market collapse. Meanwhile, DFS continues to set all time highs and is over 35% higher than its pre crisis peak in mid 2007. Especially when compared to Discover's focused business strategy, Capital One's dilutive acquisitions are just not measuring up.

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    • Dead Short Willy - You are comparing apples and oranges. Over the interval in question (2006-present)), COF made the decision to diversify into a full fledged bank. DFS and AXP are still fundamentally credit card issuers. They have suceeded in that they are now a top10 bank in the US. . The bank diversification came at a short term cost over the last 5 years and it was certainly impacted by the recession, But if you shrink your assessment window to the last 5 years COF has pretty much rebounded to 2008 pre-recession state. And based on the fact that the most recent large acquisitions (HSBC and ING - acquired in the middle of this recession) have hardly had a chance to fully bake in, I would say that the jury is still out (pessimist) or the broader based diversification is only foundationally set and the value will be exposed over the next 2 years (optimist). You must have gotten your #$%$ handed to you in a COF short transaction Dead Willy.

      • 2 Replies to keats_llc
      • keats, I don't follow the message boards much, and I certainly avoid the financial cesspool (no real value in any of them). However, I can spot a corporate monkey from a long way away, Last I checked, pretty much everyone in equities are looking for real returns. Top-10 rankings, bank diversification, "shrink your assessment window," etc. amount to nothing more than corporate spin and sales pitch to the analyst and/or employee communities; you've got to be a member of one of those classes. I'm thinking you're a COF employee. You're seem a little too biased to be an analyst.

        Sentiment: Sell

      • Keats_lllc: First off, I am not a short. On the contrary, I am decidedly long COF, and the only time I had my #$%$ handed to me was when COF collapsed from 90 to 8 during 2006 - 2009. I am of course pleased that the stock has recovered to 55. But facts are facts: both Discover and AXP share prices have navigated the financial crisis much better than COF. It is my opinion that one of the reasons for that underperformance is a near constant $30 billion COF acquisition spree that has substantially diluted shareholders.

        You indicated that COF has "suceeded in that they are now a top10 bank in the US". That is a Rich Fairbank goal, not a shareholder goal. Did owning shares in a top ten bank protect Citi and Bank of America shareholders? You also say that "DFS and AXP are still fundamentally credit card issuers". Aside from why an investor should care if the business risks/rewards are properly managed, I think COF is also fundamentally a credit card business, and a more risky one than either AXP or DFS.

        You may be correct that the ING and HSBC acquisitions will yet deliver shareholder value. However, I believe the recent stress tests indicate that in the Federal Reserve's eyes COF is relatively under capitalized for its business model. I find it interesting that COF is selling the Best Buy portfolio so soon after buying it as part of the HSBC deal. Maybe management thinks they need that additional capital to go forward with the dividend increase and share buy backs? The CARR release tomorrow should give us a clearer picture. I suspect both of us will be disappointed that the Fed is not yet ready to agree more than a minimal dividend increase.

85.02-0.09(-0.11%)May 22 4:02 PMEDT