Recent News Reported a net loss for the quarter ended June 30, 2011 of $10.6 million Deteriorating net income and disappointing ROE (sign of weakness) Underperformed the industry and S&P 500 Decline in revenue (dropped 5.8%) Decline in earnings Stock’s performance fell 32.99% worse than the S&P 500
Recommendation: SELL We should sell ORRF because they have declining net income, revenues and earnings. The stock performance has decreased from about $26 a share to $13.20 a share over 6 months and continues to decrease. We should look at investing in American Express Co. and/or Discover Financial Services Inc.
American Express Co. 3 Main Businesses: U.S. card services, International card and global commercial services Global network and merchant services Advantages over competitors: Issue its own cards and doesn't have to rely on merchant acquirers to process transactions Service cardholders and merchants, as opposed to large financial institutions gives Amex pricing power
Discover Financial Services Inc. Issues credit cards and acquires transactions Operates a closed-loop credit card network and also uses third parties to issue its cards Extends card loans (receivables) to cardholders who wish to borrow through their credit cards operates a PIN-based debit card network in the U.S. and owns Diners International, a global credit card network