Jeff Ubben is a founder, chief executive officer and the chief investment officer of ValueAct Holding LP. Prior to founding ValueAct Capital in 2000, Ubben was a managing partner at Blum Capital Partners for more than five years. Previously, Ubben was a former chairman and director of Martha Stewart Living Omnimedia, Inc., a former director of Acxiom Corp., Catalina Marketing Corp., Gartner Group, Inc., Insurance Auto Auctions, Inc., Mentor Corporation, Omnicare, Inc., Misys, plc, Per-Se Technologies, Inc., Sara Lee Corp. and several other public and private companies.
The hedge fund today has bought a big stake in American Express Co. (AXP) with an investment of about $1 billion that amounts to less than 5% of AXP’s outstanding shares. After the news, shares of the company has risen by about 7%, to $80 and now the price is -15.82% from its 52-week high and +7.51% from its 52-week low and is trading with a P/E ratio of 18.64. Value Act said AXP is not yet a core active target for them, even so they see a strong growth potential for the business of the company that together with its subsidiaries is a service company that provides customers with access to products, insights and experiences that enrich lives and build business success.
Marina Norville, a spokeswoman of AXP, said, “ValueAct is a well-respected firm, we have been speaking with them, as we do with other investors, and look forward to continuing a constructive dialogue. At American Express, we are focused on building long-term value for shareholders, and are always open to the views and perspectives of our investors.”
The company is having a troubled year. It stopped its partnership with Costco Wholesale Corp. (COST), and it lost a critical antitrust ruling that warned AXP about charging merchants higher fees. More than this, the company has the succession’s problem, after the death of President Ed Gilligan in May.
The company has a profitability and growth rated 8/10 with ROE of 28.10% that is ranked higher than 89% of other companies in the same industry; ROA of 3.81% that is outperforming the 62% of the company’s competitors and never been so high if we look at recent AXP’s history. Growth rates are positive over both the short and long term. Over the last 10 years revenue grew by 6.20%, EBITDA by 9.70% and EPS by 8.60%. Over the last 12 months these growth rates are confirmed: revenue has grown by 3.90%, EBITDA by 9.10%. Just EPS has a decline by 18.40%.
Financial strength is rated 4/10 with ratios that are underperforming the Global Credit Services industry. Cash to debt is 0.37, very weak when compared to the average ratio of the company’s competitors that is 94.80.
That trading range shows that during the last year, the price didn’t give a good return to investors that can find more interesting the yield the company pays to its shareholders. The current yield is 1.44% with a payout ratio of 23% and a growth rate of 19.90% over the last three years and 7.30% over the last 10 years.
Before this buy, the main guru holding shares of the company was Warren Buffett (Trades, Portfolio) with 15.14% of shares outstanding of AXP and the investment amounts to 11.06% of his total assets. Then Chris Davis (Trades, Portfolio) with 2.08% of outstanding shares, followed by James Barrow (Trades, Portfolio) with 1.88%
During the Q2 of 2015, Mario Gabelli (Trades, Portfolio) reduced his stake by 4.22%, while gurus Ken Fisher (Trades, Portfolio), James Barrow (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio) slightly increased their stakes by 1.85%, 1.15% and 0.01%.
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