Opinions The Monthly Gems by Allan Tong
Capital One Financial CorpCOFTOP PICKOct 01, 2025
Stock price when the opinion was issued
As of May 29, 2026. Market Open.
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Financial services have pulled back a bit. US consumer is less leveraged than in history. Should we see a slowdown, the more credit-oriented consumer debt tends to get hit the hardest. US consumer very vulnerable to higher interest rates.
He's a big fan of the motto "If you love a product, own the stock." If you use their Discover card, and you have a more positive outlook on the US economy, then own this and probably do well.
One of his best stocks ever since they merged with Discovery. However, Trump's proposed interest rate cap of 10% would wreck the entire credit card industry; if if can't charge extortionately high rates, the companies will stop lending to most people. He doesn't worry about this though, because Trump needs Congress to sign the bill and it would wreck the U.S. economy. Yesterday, COF announced a $5 billion purchase of a fintech company, Brex, intended to take on American Express. Watch this purchase. It makes sense strategically for COF. Shares plunged 8% in response, and down 16% from recent highs. Is a buying opportunity now. COF reported a mix quarter: revenues beat, but EPS missed. One problem are elevated expenses from the merger and higher marketing expenses. But he still believes in COF. He will buy back shares that he had sold much higher.
Strong player in the credit card and digital banking space. Demand is holding up. Fundamentals score 8/10, but value score is only 4/10. Analysts give potential upside of ~20% from here with quite strong Buys and Outperforms. Stock has shown some volatility, but no huge breakout yet. Not a bad time to get in. Long-term setup is positive.
She prefers JPM.
Financials are his biggest weight by far in portfolios -- in Canada, US, and globally. Especially likes banking. Stock's behaving exceedingly well, better than 85% of S&P companies in last 52 weeks. Actively buying back stock. Dividend growth story. Deal offers lots of opportunity for synergies. Likes the sector, and this name is outperforming.
Consolidation in the space had been expected, and this has done well. Trading as 12x forward PE, with a decent growth rate. Can't say anything wrong about the name, but not his focus right now. Since late 2022, sees technical pattern of higher highs and higher lows. Shares are above the 200-day MA, which is trending higher.
In his portfolios, he owns V, MA, and AXP. See his Top Picks.
The stock has run up recently after buying Discover, a major payment network that issues its own cards, but also processes payments. Visa and Mastercard don't do both. COF can scale up to a global payments platform. There's a prediction of a $7-10 billion share buyback after an internal review. Sells at a cheap 11x 2026 PE vs. AmEx's 20x PE. This has a lot more room to run.
COF is a darling of investors at 4 buys and two holds with 16.7% potential upside. Earnings growth is expected to be 14% this year, and the company actively buys back shares. The last four quarters have seen slam-dunk earnings beats.