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Stock to Avoid #9 – American Express (AXP)

If there was one mistake made in my management of these Top 10 Stocks to Avoid it would be with respect to American Express (AXP). For the same reasons that I covered my Capital One short, I could have just as easily done the same with American Express.

Shares of AXP bottomed in early March at just over $10 per share. Instead of covering with Capital One, I hedged my bet by keeping the American Express short open. I suppose that is the entire point of absolute return investing, but, boy, was I wrong in doing that.

AXP shot up like a rocket over the last three months and now trades above $23 per share. It has been a big gainer this year returning 25% through the end of the second quarter.

But despite the pain, I'll stick to my guns. I do not like the fundamentals of the credit card market, and I would still avoid AXP. In fact, the stock may be an aggressive short for some that believe credit will be the next shoe to drop during this economic crisis.

Editor's Note: I recently added Eastman Kodak (EK), origingally one of my Stocks to Avoid in 2009, to my Penny Stock Winners model portfolio as a buy recommendation.

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