A sputtering economy, implosions at financial institutions, or just plain bad management -- on any given day, investors can name a number of reasons to sell a stock. Yet while panic is never beneficial to investors, it's good practice to play devil's advocate with investments from time to time.
In Motley Fool CAPS, more than 130,000 members have weighed in on more than 5,300 stocks, sharing bullish and bearish opinions alike.
In the case of global payments provider American Express (NYSE: AXP ) , a total of 2,865 members have weighed in on its chances of success. I've already plucked out some of the bullish rationale backing American Express today, so here are three counterpoints to consider, courtesy of CAPS:
Bad macro environment: With consumer spending down and unemployment up, many investors see the chance of an extended downturn of the economy as a big risk facing American Express. JPMorgan Chase (NYSE: JPM ) recently downgraded the stock and thinks it may need to set aside more money to cover more losses as consumers stuff more money in savings and allocate less to spending.
Credit card crunch: Many look forward to another financial sector meltdown as existing consumer credit lines will continue to be cut as banks look to minimize risk. Net charge-offs at Amex grew to an 8.7% annual rate in February and have been growing over the past several years at other large card companies like Citigroup (NYSE: C ) , Discover Financial (NYSE: DFS ) , and Capital One (NYSE: COF ) .
Deteriorating asset quality: Unlike Visa (NYSE: V ) or MasterCard (NYSE: MA ) , American Express bears the risk of extending credit to its customers rather than collecting a transaction fee. Standard & Poor's recently said it may downgrade Amex's credit rating, noting that its rapid growth from 2004 through 2007 could lead to faster asset quality deterioration than others. In the end, it simply means more uncollected debts.
Of course, American Express has survived and thrived despite dozens of obstacles in the past. But the need to explore questions about whether the company has brighter days ahead is why CAPS is such a great resource to augment your own analysis.
To see what the very best CAPS members are saying now about American Express, just click on over to Motley Fool CAPS and have a look -- it's all free, and even open to your opinion.
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