3 Stocks You Can Buy Today to Profit from Consumer Explosives | So Good News


According to CEOs in the banking and credit card industries, the American consumer is powerful. They still save a lot, and people are still spending more and more despite inflationary pressures. In fact, smart spending has helped keep the economy from collapsing so far and benefited many businesses that are currently working on the payroll.

Here are three companies you can buy today to take advantage of the power of consumers.

Higher spending and deposit growth benefit Bank of America’s consumer business

Bank of America (BAC 0.29%) is the second largest bank in the US, with over $2 trillion in assets, just behind JPMorgan Chase.

Half of the bank’s revenue comes from its consumer banking division, which offers banking, lending, and retail services. The bank also has a strong debit and credit card network and generates revenue from various fees and interest.

Among bank CEOs, Brian Moynihan has been vocal about the financial power of US consumers. Moynihan also said that their operating expenses and income are strong, with more revenue than last year. He said credit card rates at Bank of America remain below pre-pandemic levels, a good sign that consumers can continue to use and repay their loans.

Bank of America makes a profit by using hard cash through its payment network, which receives fees, interest, and other fees. In the first nine months of 2022, the bank saw credit card purchases jump 18% to $263.8 billion, while debit cards rose 6.8%. These strong investments continued in the third quarter, and each rose 12.5% ​​and 10.6%, respectively.

Deposits are another important part of its business, because they allow the bank to have fixed capital to make loans and earn interest. Average customer bookings are up 10% from the same period last year.

This year, net income in the consumer banking segment rose 11%, driven by higher volume and higher interest rates. Bank of America has benefited from higher interest rates, and consumer spending and deposit growth should strengthen going forward.

The country’s top paying destination enjoys significant growth from transportation and entertainment

Visa (V -0.34%) helps people around the world move money and make payments through its debit cards, credit cards, and other payment products.

The business stands out for a number of reasons. First, its status as the world’s top payment processor means it benefits from a strong network effect – as more consumers use Visa, more merchants accept it, strengthening its network. As a result, Visa accounts for 54% of total credit card transaction volume. Second, it also uses a light business model, meaning it doesn’t consume a lot of resources or storage. As a result, the company posts stellar profits and strong cash flow.

The payment company monetizes the products through its network, so strong usage leads to more revenue. CEO Al Kelly told investors during the company’s earnings call last month that consumer behavior has changed in some ways due to rising prices, but spending remains strong in the latest quarter. The amount of travel and entertainment also increased as the fear of the epidemic subsided. In its fiscal year (ended Sept. 30), Visa’s earnings increased by 15%, resulting in a 22% increase in revenue and a 24% increase in earnings per share.

Visa has been doing well this year despite inflationary pressures. Consumers continue to spend, and management expects stable conditions to continue next year, prompting further interest rate hikes.

This company has a great customer base and a strong brand

American Express (AXP 0.52%) operates the third largest credit card in the US, following Visa and Mastercard. The company has mastered the credit card business model, and its strong brand appeals to younger generations.

In its most recent quarter, the company added 3.3 million new cards, with millennials and Gen Zers making up 60% of that growth. In addition, its high-end consumers are less vulnerable to financial shocks, making it resilient despite economic uncertainty.

The company echoed the view of others, spending hard with continued growth in goods and services and increased spending on travel and entertainment as we emerge from the pandemic. In the first nine months of this year, American Express’s revenue grew 28%, and its network traffic increased 24%.

The management does not see any change in consumer spending and has reaffirmed its guidance for this year and 2023. With a book of valuable loans, high-quality customers, and a well-known brand, American Express is another excellent company to buy while consumers remain strong.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Courtney Carlsen is not responsible for any of the content mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Mastercard, and Visa. The Motley Fool has a disclosure policy.


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