Today's 3 Stock Picks: AXP, LVS, VOD

American Express (AXP) announced Monday night that federal regulators had approved its application to become a bank holding company, but that development wasn't enough to lift its shares in a broad market selloff on Tuesday.

The credit-card company will be eligible for bailout funds from the $250 billion the Department of the Treasury is now injecting into a number of financial-services companies and banks. It will also be able to use the Federal Reserve's discount lending window and can pursue expanding its deposit base.

The government deadline for the bailout funds is Thursday, and applications normally require a minimum of 30 days. The Fed said in a statement that "in light of the unusual and exigent circumstances affecting the financial markets, and all other facts and circumstances, the board has determined that emergency conditions exist that justify expeditious action on this proposal" and granted the application.

AmEx CEO Kenneth Chenault said the shift won't change the company's core business model and won't require it to sell off other businesses.

"Given the continued volatility in the financial markets, we want to be best positioned to take advantage of the various programs the federal government has introduced or may introduce to support U.S. financial institutions," Chenault said in a prepared statement. "We will continue to build a larger deposit base to broaden our funding sources. With Federal Reserve oversight we should gain greater access to the capital on offer under the current and any future government-sponsored programs."

Meredith Whitney, the Oppenheimer & Co. analyst whose grim predictions about the financial-services sector have largely been proved correct, applauded the decision.

"Whether institutions like it or not, the only prudent thing to do is assume a protracted worst-case funding scenario," she wrote Tuesday. "We believe this strategy influenced AXP's decision last night to transform itself into a bank holding company."

Craig Maurer, at Calyon Securities, says the benefits are still off in the distance, and AmEx will continue to struggle.

"It's a 'What have you done for me lately?' environment right now," he says. "The environment is still poor for the company. This is about long-term stability, not short-term performance."

AmEx missed estimates in the June quarter and analysts have trimmed their forecasts for the past three quarters. Wall Street expects the company to earn 51 cents a share in the current quarter, down from a reported 75 cents a share a year ago.

Oppenheimer's Whitney said the main concern right now is that cardholders won't pay their bills, and that credit losses will mount.

"It's good news in that they're potentially solidifying their position," Maurer says. "But I don't think people should expect them to become a full-service bank."

Bottom Line: Buy
Tuesday's selloff is part of a broader market dip, and AmEx is now in line to be stabilized by government money, affording it more protection than before.

Investors left the tables after Las Vegas Sands (LVS) announced a recession-pressured earnings drop and said it was suspending construction on major projects in Macau.

The casino and resort operator reported earnings of 2 cents a share for the third quarter, down from 12 cents a year ago and well short of Wall Street analysts' estimates.

Jeffrey Logsdon, an analyst at BMO Capital Markets, wrote Tuesday that casino operators are suffering through a "painful business climate in Las Vegas," which cut into revenues.

Still, Sands' results were obscured by news that it has $2.1 billion in investor commitments, easing fears the company raised on Friday when it said it might default on borrowing covenants, sparking fears that the house would go bust and file for bankruptcy protection.

President and Chief Operating Officer Bill Weidner said the company would continue work on projects in Singapore and Pennsylvania, but halt work in Macau, a former Portuguese colony in South China that's become a gambling destination for mainland Chinese, who represent an enormous market.

"While still not out of the woods, LVS has solved its most immediate problems and is now able to get to the finish line with most of its significant projects on time," Jefferies & Co. analyst Lawrence Klatzkin wrote Tuesday. "While in the short term the company's markets will take some time to turn, the long-term upside of LVS is tremendous."

Logsdon said while the new financing deal, details of which remain unclear, could dilute current shares, the elimination of $1.8 billion in construction debt will ease pressure on the stock, which has lost a staggering 93% of its value in the last year.

That doesn't mean a future hot streak is out of the question, but it may be a while in coming, he wrote.

"We think LVS could be a good way for long-term investors (3-5 years) to participate in the growing international gaming space, particularly with its Macau and Singapore investments," he wrote. "We also believe the company has a strong competitive position in the Las Vegas market and is one of the best ways to play the Asian gaming market. The stock's historical volatility has provided several opportunities to trade or invest several times a year, a factor that does not appear ready to disappear any time soon, especially given its financial difficulties."

Bottom Line: Buy
Even if volatility for the sector and the company means there will be more brutal swings, the expansion into Asian markets and the prospect of better Vegas numbers at some point give Las Vegas Sands a hand worth playing.

Vodafone (VOD) the U.K. mobile communications company, said profits dropped in the first half of the year and warned that sales would lag as global economic woes hit key markets.

The company also said it would cut $1.5 billion in costs, spurring a rally after management assured investors its profit forecasts remained intact.

New CEO Vittorio Colao said the world's largest mobile-phone provider by revenue would put the brakes on its expansion into emerging markets, which are beginning to feel the bite from the global economic slowdown. Operations in Turkey rang up a $2.7 billion loss for the first six months of the year.

"In Turkey the turnaround has not yet materialized, and we are putting a lot of effort now on fixing what I would call the basics, which basically is network distribution and commercial offerings to our customers," Colao said.

Collins Stewart analyst Mark James wrote Friday that the company would have a hard time cutting costs and still maintaining profitability in emerging markets, since capital expenditures of 20% of profits are needed to sustain that growth.

"We believe, as set out in this and prior notes that the likely cash flow returns on Vodafone's assets are falling," he wrote." Our concern is that top line pressure in developed markets will tend to dent margins whilst simultaneously the cash costs of expanding in developing markets will drag cash flow expectations down."

Frederic Doussard, an analyst at Oddo Securities in Paris, wrote that European markets such as Spain, the U.K. and Italy were all likely to deteriorate further, a fear borne out by Vodafone's lowered estimates.

Bottom Line: Hold
Things are tough all over, and the American depositary shares of Vodafone indicate the spread of global woes. Wherever there are steep losses, though, it's wise to avoid selling into weakness.