Synchrony Jumps as Berkshire Adds Stake in Bet on Retail

  • Company seen as ‘good stock to play in’ for long-term retail
  • Berkshire’s stake was $520 million as of end of June

Warren Buffett continues to bet on credit cards. A regulatory filing shows Berkshire Hathaway has taken a stake in Synchrony Financial worth about $520M. Bloomberg's Jennifer Surane reports on 'Bloomberg Markets: Asia.' (Source: Bloomberg)

Synchrony Financial posted the biggest increase in the 67-company S&P 500 Financials Index after Warren Buffett’s Berkshire Hathaway Inc. took a stake in the credit-card company in a bet on the prospects of its retail clients.

Berkshire built a $520 million holding in Synchrony during the second quarter, according to a regulatory filing Monday. The card company has partnerships with retailers including Inc., Wal-Mart Stores Inc. and JC Penney Co. Synchrony makes loans and operates a network to process the payments, making it similar to another Berkshire investment -- American Express Co.

“With AmEx, you’re taking a view of the overall economy and the prime customer, whereas with Synchrony you’re taking a view on retail, and somewhat of a more diversified customer base,” Vincent Caintic, an analyst at Stephens Inc., said in a telephone interview. “If you believe in a recovering retail environment, this would be a good stock to play in.”

Synchrony climbed 3.8 percent to $30.77 at 10:07 a.m. in New York. That pared the stock’s loss for the year to about 15 percent.

Retailers including handbag seller Coach Inc. and Advance Auto Parts Inc. have been facing pressure. The companies slumped Tuesday after issuing forecasts that disappointed analysts.

Home Depot Inc. also dropped, though the company topped profit estimates as sales grew faster than expected. In a bright spot for the broader retail industry, U.S. sales advanced in July by the most this year, with widespread gains from department stores to building materials outlets, according to Commerce Department figures released Tuesday.

Synchrony “should be able to work past their credit issues that they’re facing,” said Caintic, who has a neutral rating on the stock and highlighted Buffett’s long-term view. “It does make me worried about the company over the next year or so. But over the next five years, this company should continue to grow and it should continue to take share.”

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