American Express Company (NYSE: AXP) is a global payments, network and travel company well-known for its credit cards and travelers checks. The company has been struggling recently as consumers spend less money and more card-holders default on their monthly payments. However, recent purchases by key insiders are indicating to many investors that the end is in sight. So, is this a company worth putting on the radar over the next few months or simply some overzealous directors?

Director Steven Reinemund purchased 10,000 shares in cash at $45 per share in a transaction worth $450,000 on 02/21/2008, bringing his/her total holdings to 20,000 shares. Meanwhile, Director Ursula Burns purchased 1,000 shares in cash at $44.08 per share in a transaction worth $44,080 on 02/25/2008, bringing his/her total holdings to 16,000 shares. These transactions also follow earlier insider buying on February 11th when director Ronald Williams purchased 5,500 shares at $46.25 a piece. Notably, all of these transactions were “Code P” Form 4 filings, which means that they were voluntary purchases in hard cash rather than as a part of an incentives plan or required purchase.

Many are concerned that a weakened economy will hurt the company given its reliance on consumer spending in order to drive revenues. These concerns have driven the stock down to its 52-week low and caused it to trade at just over 12x earnings. Obviously, this is a cheap valuation but could be deserved if the company is indeed facing further problems ahead. According to its most recent 10-K filing, American Express took a $275 million charge thanks to defaults in its credit card division while adopting “cautious view” for the coming year. The company was forced to revise its estimates for 2008 lower s thanks to slower consumer spending and a sudden rise in defaults.

American Express also announced the sale of its banking subsidiary last week for around $823 million, which equals the net asset value of the target at completion plus $300 million. This sale provides the company with an opportunity to add capability, scale and momentum to its strategically important Financial Institutions and Private Bank businesses. As part of the transaction, Standard Charter (the buyer of the banking business) also has an option to buy 100 percent of American Express International Deposit Co 18 months from today with the consideration payable being the net asset value of the target at the time the option is exercised. This move could provide the bank with even more spare cash for use in other areas.

The future of the economy remains uncertain with rising consumer prices, slower job growth, and a dollar that is rapidly losing value, but the sell-off in American Express may be overdone. Several key insiders have definitely expressed support for the stock at these levels and it may be worth watching given their insider knowledge of the company. Combined, these factors make AXP a stock that is definitely worth following over the next year or so!

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