Capital One made an operating profit every year during the Great Recession. The highest this ever got in the 2008 recession for COF was about 10%. Doing that, it's hard not to make money as more than 15% of credit card loans will have to be charged off before the company starts to show a loss. If you flip to page 11 on their 10-Q, you'll see that they're charging 18% on credit cards and paying 2.4% on deposits. When you dig into the business model, it's not rocket science why it might be worth the risk to buy some Capital One shares. With the Fed now poised to hike interest rates even more, the company is set to see its interest income increase further. With average interest rates on credit cards at or near record highs, that means Capital One can rake in the profits– if they can collect on their credit card loans at any reasonable rate. But with the stock well off of 2021 highs, what are they seeing? Data by YCharts Credit Cards Are a Heck of a Business ModelĬapital One makes its money primarily from credit card lending. Burry is a value investor who got rich from his participation in The Big Short of the 2000s housing bubble, while Buffett is the king of buy-and-hold value investing. Berkshire Hathaway ( BRK.B) ( BRK.A) seems to have pumped about a billion dollars into Capital One, while Burry put in $7 million of his fund into COF stock as well, accounting for roughly 3% of his total assets under management. Recent 13-F filings show that Warren Buffett and Michael Burry both added shares in Capital One ( NYSE: COF) to their portfolios in Q1.
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