I'm not the biggest fan of Discover Financial Services (NYSE: DFS), the credit-card company that competes with MasterCard (NYSE: MA), Visa, Inc. (NYSE: V), and American Express (NYSE: AXP). I currently like Visa the best. Why? I like the brand, I like the fact that it doesn't have direct exposure to loans, and I think there's a lot of upside left to its stock price on a long-term basis (granted, the stock hasn't been strong lately). Nevertheless, I have to wonder if there might be trade potential with Discover's stock.
It's not so much the Q4 earnings. Net income from continuing operations more than doubled to $0.92 per share, something that looks great on the surface. It was helped along, however, by settlement proceeds relating to antitrust complaints against Visa and MasterCard. Not only that, but when you take a look at the consumer-confidence landscape, you'll see that it's pretty dreadful. It doesn't take too much thinking to realize that spending will be down and bad loans most likely will be up going forward.
