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>>> Payoneer empowers global commerce by connecting businesses, professionals, countries and currencies with its innovative cross-border payments platform. In today's borderless digital world, Payoneer enables millions of businesses and professionals from more than 200 countries to reach new audiences by facilitating seamless, cross-borderpayments. Additionally, thousands of leading corporations including Google, Airbnb, Elance-oDesk and Getty Images rely on Payoneer's mass payout services.
With Payoneer's fast, flexible, secure and low-cost solutions, businesses and professionals in both developed and emerging markets can now pay and get paid globally as easily as they do locally. Founded in 2005 and based in New York, Payoneer is venture-backed, profitable and ranked in the top 100 of Inc. 5000's Financial Services companies.
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Ecofin Digital Payments Infrastructure Fund (TPAY) -
Ecofin Global Water ESG Fund (EBLU) and Ecofin Digital Payments Infrastructure Fund (TPAY) will Transfer to NYSE Arca
Business Wire
December 21, 2020
https://www.businesswire.com/news/home/20201221005715/en/Ecofin-Global-Water-ESG-Fund-EBLU-and-Ecofin-Digital-Payments-Infrastructure-Fund-TPAY-will-Transfer-to-NYSE-Arca
LEAWOOD, Kan.--(BUSINESS WIRE)--Ecofin, which is focused on sustainable investing, today announced that it will transfer the listing of two exchange-traded funds from Cboe BZX to NYSE Arca upon market open on January 4, 2021.
Current shareholders are not required to take any action, nor is the transfer expected to have any effect on the trading of fund shares.
The following ETFs are retaining their current ticker symbol and transferring to NYSE Arca:
Ecofin ETF
Ticker
Ecofin Global Water ESG Fund
EBLU
Ecofin Digital Payments Infrastructure Fund
TPAY
By moving EBLU and TPAY to NYSE Arca, the adviser’s entire suite of ETFs will be available on one exchange.
For more information on these funds and how Ecofin is generating returns and making an impact, visit www.ecofininvest.com.
About the Ecofin Brand
Ecofin focuses on sustainable investments and is dedicated to uniting ecology and finance. Our mission is to generate strong risk-adjusted returns while optimizing investors’ impact on society. We are socially-minded, ESG-attentive investors, harnessing years of expertise investing in sustainable infrastructure, energy transition, clean water & environment and social impact. Our strategies are accessible through a variety of investment solutions and seek to achieve positive impacts that align with UN Sustainable Development Goals by addressing pressing global issues surrounding climate action, clean energy, water, education, healthcare and sustainable communities.
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>>> Stripe to Offer Citi, Goldman Accounts Through E-Commerce Giants
Bloomberg
By Jennifer Surane
December 3, 2020
https://www.bloomberg.com/news/articles/2020-12-03/stripe-to-offer-citi-goldman-accounts-through-e-commerce-giants
Online stores to have access to checking accounts, services
‘Business banking has largely been left behind,’ Stripe says
Stripe Inc. will team up with some of the world’s largest banks to offer checking accounts to businesses that sell their wares on e-commerce platforms such as Shopify Inc.
Stripe said banks including Citigroup Inc., Goldman Sachs Group Inc. and Barclays Plc will now be able to offer checking accounts and other financial services through e-commerce providers. If a coffee shop, for instance, uses Shopify to sell mugs and coffee beans online, it will now be able to open a bank account too.
“Everything about running an online business has been transformed by technology, but business banking has largely been left behind,” Karim Temsamani, head of banking and financial products at Stripe, said in a statement. “But we’re changing this.”
Businesses use Stripe’s software to accept online payments, and the company has benefited during the pandemic as people stuck at home have relied more heavily on e-commerce to do their shopping. The company is in talks to raise a new funding round that could value it at as much as $100 billion, Bloomberg reported last month.
For online firms, setting up a bank account takes an average of seven days, Stripe said. Almost a quarter of businesses ultimately have to send a fax to open the account, and more than half need to visit a bank branch. With its latest offering, which will be known as Stripe Treasury, the company is seeking to disrupt all that.
Still, Stripe is relying on established banks for the service.
“Our vision is for this partnership to fuel global commerce by enabling Stripe to launch the next-generation banking proposition for their clients,” Manish Kohli, global head of payments and receivables in Citigroup’s treasury and trade solutions business, said in the statement.
Stripe’s plans were reported earlier Thursday by the Wall Street Journal.
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>>> Stripe chases $100bn valuation with no sign of IPO
FinTech Futures
by Ruby Hinchliffe
1st December 2020
https://www.fintechfutures.com/2020/12/stripe-chases-100bn-valuation-with-no-sign-of-ipo/
Stripe, with its last private valuation standing at $36 billion, is reportedly chasing a new valuation of up to $100 billion, according to Bloomberg.
Co-founded by Irish brothers, Patrick and John Collison, Stripe could see its valuation quadruple in just two years.
Its latest funding round – the value of which is yet to be disclosed – follows a $600 million funding round just seven months ago. Stripe’s total money raised to date is almost $2 billion, according to PitchBook data.
But Stripe is still a private company, and there is no talk of it holding an initial public offering (IPO) – prompting speculation that the brothers, worth $4.3 billion each, are putting it off.
The company did, however, hire Dhivya Suryadevara – formerly General Motors – as its new chief financial officer (CFO) this year.
A crazy valuation?
At $100 billion, that would make Stripe the most valuable venture-backed start-up in the US, according to CB Insights.
Axios points out that Chinese firm, ByteDance’s divestment of its majority stake in TikTok had cleared on Friday, which paves the way for Stripe to be a record-breaker.
It is possible that the latest funding won’t happen, or that it will happen, but at a lower valuation.
Regardless, there is logic behind such an inflated valuation for the payments processing software provider.
COVID-19 has caused e-commerce sales to skyrocket, seeing Stripe benefit from the industry’s anticipated 20% growth in 2020. That’s according to IBM’s US Retail Index.
But it’s clear there’s still major room for growth too. Forbes quoted two years ago that less than 10% of global commerce happens online.
Which is why Stripe has since bought Nigerian company, Paystack, for $200 million. It also led a $12 million round for Manila-based PayMongo.
And as its public competitors – Square, PayPal, and Ayden among them – are seeing their stocks as much as double and triple this year, it’s unsurprising that Stripe’s value is in turn driven up.
This year has also continued the trend of Stripe not only serving start-ups, but also working with enterprise industry names.
Zoom, Just Eat, media group NBC and toy-maker Mattel all made the list of new clients. They join the likes of Amazon, Salesforce, Lyft and Instacart.
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Square - >>> 3 Tech Stocks That Are Better Than Snowflake
Investors can still win big with these fast-growing stocks.
Motley Fool
Chris Neiger, Danny Vena, And Brian Withers
Dec 13, 2020
https://www.fool.com/investing/2020/12/13/3-tech-stocks-that-are-better-than-snowflake/
Shares of Snowflake, a cloud data company, have soared since the company went public back in September. Some investors have flocked to the tech stock because of its massive opportunity in the cloud data space, and the fact that Warren Buffett's Berkshire Hathaway is an investor in the company.
But despite all of the attention Snowflake has received, there are still a lot of fast-growing companies that could be even better long-term investments. Here's why MongoDB (NASDAQ:MDB), Okta (NASDAQ:OKTA), and Square (NYSE:SQ) fit the description.
MongoDB: Creating a home for messy data
Danny Vena (MongoDB): One of the key takeaways from 2020 is that cloud-based solutions are no longer a luxury but a necessity, providing access anywhere, anytime. That's one of the reasons investor demand for Snowflake has been off the charts. Unfortunately, Snowflake's valuation is also off the charts, with the stock trading at 214 times its trailing-12-month sales of $490 million, making it one of the most expensive growth stocks around.
Investors looking for a less expensive cloud alternative should consider MongoDB. One of the challenges with legacy databases is that they couldn't accommodate any data that didn't fit neatly into rows or columns. That's where MongoDB comes in. The company offers a cloud-native solution that houses data and electronic information of all types, including photos, audio, social media posts, video, and even full documents.
MongoDB offers a free version of its flagship database that customers have downloaded more than 90 million times since it was introduced in 2009, and over 35 million times in 2019 alone. After experiencing firsthand the ease and utility of MongoDB's flagship product, many developers take the plunge and sign up for Atlas -- the company's cloud-centric, fully managed database-as-a-service product.
While the pandemic temporarily stunted MongoDB's growth, the company has come roaring back. In the third quarter, revenue grew 38% year over year, while subscription sales increased 39%. More importantly, adoption of Atlas grew even faster, as revenue climbed 61% year over year and now accounts for roughly 47% of the company's total sales. Not bad for a product that was introduced just four years ago.
The customer metrics are equally compelling. MongoDB added more than 2,400 customers during the quarter, bringing the total customer count to 22,600, up 42% year over year. Atlas customers grew more quickly -- to 21,100, up 49%. Those contributing at least $100,000 in annual recurring revenue climbed to 898, up 31%. Finally, the company's net AR expansion rate, which tracks the rate at which existing customers spend more, remained above 120% for the 24th consecutive quarter.
The company's customer satisfaction scores are also enviable. Atlas commands a net promoter score of 74. That's a remarkably high score; 50 or higher is considered excellent, and any number above 70 is considered world-class.
The digital transformation is ongoing and the data that needs to be stored is growing exponentially. The database software market is estimated to be $71 billion in 2020, growing to $97 billion by 2023. Considering MongoDB's revenue topped out at $422 million last year, it has a long runway for growth.
Oh, and did I mention that at just 34 times sales, it's a steal compared to Snowflake.
Okta: Taking advantage of the cloud trend
Brian Withers (Okta): Even though Snowflake is putting up massive growth, investors can get in on the cloud trend without a triple-digit nosebleed valuation. As enterprises move more of their software to the cloud, Okta's identity management platform is a key enabler to keep their infrastructure secure. It makes it easy for information technology teams to secure their cloud applications and provides authorized users the ability to sign on to all of their apps with a single password.
Cloud software is still in the early stages of adoption. IDC reports that 81% of enterprise organizations have at least one core application in the cloud, but only 13% of large companies are 100% dependent on the cloud. As businesses extend their use of cloud-based software tools, the need for a robust identity management solution like Okta's only grows stronger.
With these tailwinds, the company has grown to a $768 million trailing-12-month revenue business. For the upcoming fiscal year, its top line is expected to surpass the $1 billion mark, representing a 29% year-over-year growth. This is a decline from the current year's expected 40%, but it is likely to beat its guidance as it's done frequently in the past.
One indicator that Okta's revenue growth forecast could be light is the solid increase in its remaining performance obligations (RPO). RPO represents the total value of all customer contracts, which grew at an impressive 53% last quarter. Additionally, the company had an important win last quarter as Amazon Web Services (AWS) now includes Okta as part of its marketplace. This opens up the platform to a whole new set of customers. With stable subscription revenue accounting for 95% of its top line, investors can be confident growth will continue long into the future.
Even though Snowflake is growing faster at triple-digit rates, that growth comes at a tremendous price. Not that Okta is cheap, but its lofty price-to-sales ratio of 39 looks like a bargain next to Snowflake's 224. Okta is a better way for investors to profit as organizations continue their move to the cloud.
Square - This company is betting on the shift to digital payments
Chris Neiger (Square): For years, Square has been helping merchants of all sizes shift from physical cash to a digital payment world. The company's point-of-sale terminals are often used with digital card readers and near-field communication devices that make paying with a phone or tapping a credit card to pay easier than ever.
The pandemic has accelerated the shift to digital payments as many people have preferred not to handle physical money. This has helped boost Square's business, with third-quarter revenue skyrocketing 148% year over year (excluding its Caviar business). Square users are also spending a lot more through the company's payment platform, as gross payment volume jumped 91% in the recent quarter to $31.7 billion.
Additionally, the company's popular Cash App, which allows users to send money to friends, saw the number of its daily transacting customers nearly double year over year in the third quarter. Cash App sales also popped 174% in the quarter.
Digital payments were already becoming mainstream before the pandemic, but the trend is even more solidified now. This year the digital payment market will reach $910 billion, and by 2024 it'll be worth an estimated $1.5 trillion. For investors looking for a fast-growing tech stock that's tapping into this massive money trend, Square looks like a great long-term bet.
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Square - >>> Forget FAANG, Buy These 2 Unstoppable Stocks Instead
While tech stocks are overvalued, these investments have triple-digit revenue growth and incredible upside over the next decade.
Motley Fool
by Taylor Carmichael
Dec 11, 2020
https://www.fool.com/investing/2020/12/11/forget-faang-buy-these-2-unstoppable-stocks-instea/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
As we get ready to close the book on 2020, allow me to call out two sectors that will create enormous wealth for investors over the next decade.
The first is virtual currencies and digital wallets. Fintech is changing banking and payments forever and Square (NYSE:SQ) is at the center of this revolution. It could eventually become the most valuable financial stock in the world.
Another trend creating a lot of wealth is the (state by state) legalization of marijuana. Billions and billions of dollars will be made in this sector. We can already spot one winner -- the highly profitable (and fast-growing) REIT stock Innovative Industrial Properties (NYSE:IIPR).
Both of these stocks have creamed the FAANG stocks over the last few years and will continue to outperform over the next decade. Here's why you should forget about FAANG and buy these two cash machines instead.
Why Square is more valuable than any bank
The banking system is highly commoditized. If you blindfolded me and set me down in the lobby of an unknown bank, I couldn't tell you if I was in a Bank of America, a JPMorgan Chase, or a Wells Fargo. They're identical. They all have ATM services, online banking, and safety deposit boxes, and all these banks rely on the same credit check reports.
Square is a different breed. It's a fintech specialist that makes financial services cheaper and faster. Right now, the company provides technology for people performing financial tasks. Square customers use its Cash app to transfer money and make payments. When Square jumped into the brokerage business and offered free trades and fractional shares, Schwab followed, and a race to zero-commission trades began.
Last year Square introduced Square Card, a debit card that allowed businesses in the seller network to start making payments from existing revenue streams without the need to set up a bank account. In the third quarter, sellers spent more than $250 million on their Square cards.
Square's technology allows people to transfer money, use debit cards, and buy stocks and trade currencies. It's already providing a lot of traditional banking services. And now Square has been cleared to do the most important banking function -- provide loans. Square's new virtual bank, Square Financial Services, will be headquartered in Salt Lake City, as its charter was approved by the Federal Deposit Insurance Corporation (FDIC) and Utah regulators.
Square is already a huge business, with over $7 billion in annual revenues. And it's still growing incredibly fast; revenues are up 139% in the most recent quarter. While fintech has been very profitable, it's actually just getting started.
What will be amazing is when Square starts loaning money to all the businesses in its network. At first, banking will be a very small part of Square's business. But as the loan division ramps up, Square will start taking market share from the banks. And the company has serious advantages in that regard. Consider all the data Square has about the companies in its network. If you're a restaurant using Square's point-of-sale technology, Square knows all about your revenues and your ability to make payments. Square doesn't need to run credit checks or ask anybody else about your ability to repay debt. The company has a huge advantage over the banks in financial information about its customers. This knowledge is power and will be immensely profitable to Square (and its investors) in the future.
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Visa - >>> Don't miss this explosive secular trend
https://www.fool.com/investing/2020/10/24/5-great-stocks-you-can-buy-and-hold-forever/
Like NextEra, Visa (NYSE:V) is riding a mega-growth secular trend: As the war on fossil fuels is propelling NextEra, the war on cash is lifting Visa.
The e-commerce boom and the digitization of major service industries like banking have triggered a major shift from cash to cashless modes of payments like debit and credit cards, online payments, and mobile wallets. Visa is already the world's largest payments processor, facilitating transactions between consumers, merchants, and financial institutions. In 2019, it had 3.4 billion cards in circulation across 200 countries, processed 553 million transactions per day, and generated $23 billion in revenue.
That's an enormous business, and this could be just the beginning. Visa is extensively using technologies like blockchain, and expanding into newer areas such as business-to-business and person-to-person payments, both of which are multitrillion-dollar addressable markets. Its value-added services like analytics and fraud management also provide it with tremendous growth opportunities.
With Visa's operating margins already north of 60% and with management targeting a dividend payout of 20% to 25%, patient investors could reap multibagger returns from this fintech stock.
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>>> Visa CEO Al Kelly Just Said This About the DOJ Lawsuit
The Justice Department's lawsuit is related to the payment processing giant's planned purchase of Plaid. The CEO also discussed earnings and another new acquisition.
Motley Fool
Dave Kovaleski
Oct 31, 2020
https://www.fool.com/investing/2020/10/31/visa-ceo-al-kelly-just-said-this-about-the-doj-law/
It was a busy end to October for Visa (NYSE:V). The payment processor announced a new acquisition, reported a decline in earnings for its fiscal fourth quarter, and learned of a lawsuit against it by the Justice Department. Chairman and CEO Al Kelly and his executive team addressed all three of these issues on the company's quarterly earnings call Wednesday. Here is what they had to say.
An L-shaped recovery for cross-border transactions
Visa beat earnings estimates for its Q4, which ended Sept. 30, but it was still a bumpy ride, as net income fell 29% year over year to $2.1 billion, or $0.97 per share. Revenue was down 17% to $5.1 billion on a sharp 29% drop in the volume of cross-border transactions -- those for which the merchant is in a different country than the issuer of the customer's card.
"The cross-border recovery has been sluggish since borders remain closed or there are significant impediments to crossing borders like quarantine and other such restrictions," said Vice Chairman and CFO Vasant Prabhu. "From May through August, cross-border volumes were persistently down in the mid 40% range. September saw a 6 point recovery, which has continued into October."
Prabhu said the September uptick was driven by a few "relatively frictionless" corridors, including travel from the U.S. to Mexico and the Caribbean. While the recovery has been V-shaped for domestic transaction volumes, the pattern has been L-shaped for cross-border volumes.
"The cross-border business remains a significant and continued drag on revenue growth," he added.
Pass the YellowPepper
The other big news of the week was the announcement that Visa plans to buy YellowPepper, a Miami-based financial technology company, or fintech, that works with financial institutions in Latin America and the Caribbean. YellowPepper's technology allows issuers, processors, and governments to initiate secure, real-time transactions for customers across a variety of payment platforms and networks using just an email address, phone number, or some other personal credential.
"For Visa, the acquisition extends our network of networks strategy by significantly reducing the time to market and cost for issuers and processors, regardless of who owns or operates the payment rails," Kelly said.
It also facilitates an easier integration for financial institutions to Visa's person-to-person digital payment platform, Visa Direct, as well as Visa's B2B Connect, which allows financial institutions to process cross-border business-to-business payments.
"Having a software platform like YellowPepper makes it easier for these connections to happen and gives us an on-ramp to sell value-added services and accommodate the needs of various clients to have network-agnostic solutions," Kelly said. "It's going to give us a good path toward accelerating both core payments as well as value-added services and new flows throughout Latin America. And then over time, we will look to extend the capability beyond that region."
No one likes a Plaid suit
But an earlier acquisition hit a snag this week when Visa and its consulting firm, Bain and Co., were sued by the Justice Department regarding Visa's $5.3 billion purchase of Plaid back in January.
Plaid is a fintech that helps consumers securely connect their financial accounts to their apps. The Justice Department filed a petition in the U.S. District Court for the District of Massachusetts to enforce Bain's compliance with the department's investigation of the proposed acquisition. The petition alleges that Bain has withheld important documents that the Justice Department requested via its CID (civil investigative demand). It goes on to say that Bain's "unsupported claims of privilege over the documents" have stymied the Antitrust Division's investigation.
In June, Justice Department officials asked Bain to answer interrogatories and produce documents that "discuss Visa's pricing strategy and competition against other debit card networks that may be important to the division's analysis of the proposed acquisition's effects."
The Wall Street Journal reported Wednesday that the deal could be in jeopardy because of antitrust concerns, citing people familiar with the matter. Regulators could decide soon to block the deal, the Journal reported, based on the premise that it could limit "nascent competition in the payments sector."
Kelly addressed the topic briefly in the earnings call, saying, "In terms of Plaid, I want to say two things. First, we continue to engage with the Department of Justice on the review of the acquisition. Second, the Department of Justice's lawsuit yesterday against Visa and Bain and Co. is related to a dispute over documents they requested as part of the review of the deal. Beyond that, we're not going to comment further."
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>>> Mastercard Stock Is Having Its Worst Day Since March. Earnings Were Worse Than Expected.
By Daren Fonda
Oct. 28, 2020
https://www.barrons.com/articles/mastercard-stock-is-falling-as-earnings-fall-short-of-forecasts-51603897285?siteid=yhoof2
Mastercard’s revenue and profit for the third quarter came in lower than expected as cross-border card transactions—a key profit driver—remained severely depressed due to the pandemic and border closures.
The stock was down 6% in morning trading, marking its worst day since March 20.
Payment processing company Fiserv (ticker: FISV), meanwhile, reported a solid quarter, sending its stock up about 2% in early trading.
Mastercard (MA) reported revenue of $3.8 billion, down 14% from a year ago, and 3% less than Wall Street had expected. The firm reported adjusted earnings of $1.60 a share, down 26% year over year, missing estimates for $1.65.
One big hurdle for Mastercard is cross-border transactions, which generate higher margins than domestic transactions and are a key driver of earnings. The dollar volume of cross-border transactions was down 36%, due largely to a steep drop in travel-related activity. Fees on cross-border transactions totaled $791 million in the quarter, down 48% from a year earlier.
Cross-border volume overall is down 29% year to date, pressuring Mastercard’s revenue and profit, both expected to fall this year compared to 2019.
Mastercard CEO Ajay Banga said in a statement that the company is “seeing encouraging progress in the trajectory of domestic spending, while travel spending remains a challenge.” He added that Mastercard is winning new business in core payments and making progress in digital payments and other growth areas.
Barron’s has been positive on payment companies such as Mastercard, Visa (V), and PayPal (PYPL). The pandemic is accelerating a shift from cash to cards and digital payments. But Mastercard’s results imply that international transactions remain a source of weakness as border closures and travel restrictions keep businesses and consumers largely homebound.
Mastercard’s results actually showed improvements from the second quarter, noted Cowen analyst George Mihalos. All key metrics improved slightly, he wrote, including cross-border transaction volumes, which picked up in the last few weeks of October.
Still, cross-border volume outside the European Union was down in the mid 40 percentages in October, year over year, as in-person transactions slumped due to tighter Covid restrictions, noted Jefferies analyst Trevor Williams.
The volume of U.S. transactions “switched” by Mastercard—industry terminology for purchases authorized, cleared, and settled—may also have gotten a bump from Amazon Prime Day, which was later this year, along with government disbursements to consumers. Normalizing for those effects would have dented switched volumes by about two percentage points, he added.
Mizuho analyst Dan Dolev noted that the cross-border recovery isn’t occurring nearly fast enough to meet estimates. While the improvement in the third quarter was above the lows of July, down 39% year-over-year, the decline in late October “is still dramatic and hurts growth.”
Wolfe Research’s Darrin Peller urged investors to stick with the stock, however, despite the near-term weakness. The company’s structural position should be stronger on the other side of the pandemic, he wrote, benefiting from greater e-commerce and digital transactions, accelerating contactless payments, and strong demand for services such as data analytics, cybersecurity, and business payments to employees and contract workers.
Peller maintained an Outperform rating on the stock.
Fiserv, meanwhile, reported a rebound in revenue growth as its merchant acquisition business—running payment systems for retailers and other merchants—grew 6% in the quarter. The company also made headway with Clover, a rival point-of-sale system to Square (SQ) for small businesses.
Fiserv stock is down about 16% this year, due to concerns about a broad retail slowdown and ongoing weakness in merchant acquiring. MoffettNathanson analyst Lisa Ellis noted that the stock is “stuck in purgatory” as investors digest the path of the pandemic. But she raised her estimates for 2021, and outlined factors that could get the stock moving, including gains in merchant acquiring, e-commerce, and convincing investors that Clover will be a major competitor in small-business payments.
Dolev also viewed Fiserv’s results positively, writing that results in merchant acquiring could “boost morale” on the stock, and that the trends bode well for rival payment processors, such as Fidelity National Information Services (FIS), Global Payments (GPN), and Square.
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>>> Is Fiserv a Buy?
Credit risk isn't the only issue hurting financial companies, as this fintech shows.
Motley Fool
Brent Nyitray
Oct 21, 2020
https://www.fool.com/investing/2020/10/21/is-fiserv-a-buy-due-oct-19/
The financial sector has been a lousy place for investors this year. Between the banks taking big provisions for loan losses and the real estate investment trusts (REITs) dealing with tenant delinquencies, it's been a struggle. Unlike most of the financials, Fiserv (NASDAQ:FISV) doesn't make its money taking credit risk -- it's a fintech company that earns fee income from the services it provides. Does a lack of credit exposure mean Fiserv is a better buy?
Merger synergies will be a big driver of earnings
Fiserv offers electronic payment processing, retail point of sale, and e-commerce services, some of which it added through its acquisition of First Data in July 2019. It added the Clover point-of-sale operating system through that merger, and it partners with Early Warning Services to offer the Zelle brand of person-to-person payment technology.
Falling retail sales have affected Fiserv during the COVID-19 pandemic; while year-over-year comparisons have been difficult because of the First Data merger, internal revenue growth (that is, organic growth) fell about 7% in the second quarter. On the earnings call, Executive Chairman Jeffery Yabuki said, "At our May 7th call, we shared our thesis that April would be the likely trough and we expected to see gradual improvement from there, and that is exactly what has happened. Each month revenue has improved sequentially from the lows of April and culminated with a return to internal revenue growth in July."
Going forward, synergies from the First Data merger should boost earnings. Synergies generally come in two flavors: revenue and cost synergies. Cost synergies are the most common, and involve cost cutting by eliminating redundant functions. Examples of cost synergies would involve the elimination of duplicate investor relations functions, or other overhead. Revenue synergies are cross-selling opportunities, which are often hard to quantify and even harder to realize. Fiserv expects to realize about $1.2 billion in synergies from the merger, and so far has realized $750 million through July.
Decent multiple with decent earnings growth
On the conference call, CEO Frank Bisignano said that the company expected to earn adjusted earnings per share of $4.33 for 2020, adjusted for divestitures. This works out to be a price-to-earnings ratio (P/E) just under 23 times at Wednesday morning's prices. Below is a chart of Fiserv's P/E ratio for the two years before the First Data merger.
As you can see, the current forward P/E around 23 is toward the bottom of the pre-merger range. The Street expects Fiserv to earn $4.40, which is a little better than the company guided on the second-quarter call. The current estimate for 2021 earnings is $5.38 per share, which represents 22% earnings growth and puts the company's P/E to growth (PEG) ratio right around 1. Legendary investor Peter Lynch was a huge fan of stocks with PEG ratios at 1 or below.
Debt and intangible assets are a negative
That said, Fiserv has a lot of debt, around $21 billion worth. The debt burden doesn't appear to be an issue since Fiserv generated almost $900 million in free cash flow in the second quarter and has about $1.1 billion in debt maturing in the next two years. In addition, interest expense was covered over 7 times last year by EBITDA (earnings before interest, taxes, depreciation, and amortization). That said, the debt isn't the only balance sheet issue: Nearly $40 billion of the company's assets are intangible assets like goodwill, which are extremely hard to monetize. They certainly stick out when book value is only $33 billion to begin with.
So, is Fiserv a buy? Valuation-wise, Fiserv is certainly trading toward the low end of its P/E range, and has an attractive PEG ratio. I doubt a long-term investor would be making a mistake buying the company at these levels. That said, I would rather get involved once the smoke has cleared from COVID and we start seeing stronger consumer spending. Until then, the stock will probably correlate with the rest of the financial sector.
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>>> Visa and Mastercard have a lot in common, but COVID-19 puts one key difference in focus
MarketWatch
Oct. 30, 2020
By Emily Bary
https://www.marketwatch.com/story/visa-and-mastercard-have-a-lot-in-common-but-covid-19-puts-one-key-difference-in-focus-11604090026?siteid=yhoof2
Visa is more exposed to debit spending, which is growing quickly amid economic concerns and a shift away from cash
The COVID-19 crisis is accelerating the transition from cash to cards.
Visa Inc. and Mastercard Inc. are often viewed as one and the same in the investment community, but the small differences between their businesses are coming into focus as the COVID-19 alters the way people spend their money.
Consumers have been showing an increasing preference for debit cards versus credit cards given the weak economic climate brought on by the pandemic, and right now this skew favors Visa V, +1.66%, which has a larger debit business. Visa generated 52% of its volume in the September quarter from debit transactions, compared with 44% for Mastercard MA, +0.46%.
“What happened in the COVID-19 crisis is that the replacement for cash is basically debit,” Mizuho analyst Dan Dolev told MarketWatch. People may be more hesitant about touching cash, but they’re also less inclined to use credit during a downturn due to unease over spending borrowed money.
What’s more, the purchases people are making right now are ones that normally tilt toward debit anyway, according to Susquehanna analyst James Friedman, who has positive ratings on Visa and Mastercard. “People historically pay for groceries with debit, pay for gas with debit, and pay for travel and restaurants with credit,” he told MarketWatch. The travel and restaurant industries are under pressure, but groceries are a utility purchase.
Both Visa and Mastercard saw worldwide debit volume growth of about 20% in the September quarter, though Visa benefitted more from this momentum given that debit makes up a larger portion of its business. The companies each reported results Wednesday.
The debit and credit businesses are “bifurcating so dramatically,” according to MoffettNathanson analyst Lisa Ellis, magnifying a difference between Visa and Mastercard that’s “normally not a big deal.” In contrast to debit’s 20% volume increase, credit is down about 5% to 10%, she said.
Visa Chief Financial Officer Vasant Prabhu highlighted on the company’s earnings call that debit is growing at twice the rate it was prior to the pandemic, and that the category “stayed resilient through the shutdowns,” posting growth in the U.S. even earlier in the pandemic when there were more restrictions on activities.
“They’re situated perfectly for what’s happening,” Dolev said of Visa, noting that the debit skew could also prove beneficial even during normal economic times given a trend of some younger consumers preferring debit. On trendy peer-to-peer platforms like Square Inc.’s SQ, +0.22% Cash App and PayPal Holdings Inc.’s PYPL, +0.87% Venmo, many users choose to fund their accounts with debit cards.
In normal recessionary times, debit stays strong for a while before a swing back into credit takes place after a few years, Ellis said, but the COVID-19 crisis adds a new dimension. In addition to the cyclical shift toward debit because of the pandemic, there’s also been a step up in cash displacement, which is a secular trend that she expects to continue. Much of that movement from cash to cards seems to be happening through debit.
The U.S. and U.K. already had about 70% card penetration prior to the pandemic, and “a lot of what’s left is low dollar amounts and demographics that are less digitally involved, like lower-income or older populations,” Ellis said. When these groups enter the digital arena, they’re more likely to do so with debit, she argued.
Prabhu seemed to hint at these dynamics on Visa’s earnings call, when he said that debit is “the biggest beneficiary of the accelerated growth of e-commerce and the shift away from cash.”
This comment was interesting and not necessarily intuitive, Susquehanna’s Friedman argued, since debit “is such a utility” and not always “used for discretionary spend, which e-commerce is famous for.” That the COVID-19 crisis has moved more debit spending over to online channels is suggestive to him of new e-commerce users coming into the fray.
Ellis said that the debit trends are one reason she tilts toward Visa shares over Mastercard’s these days, though she has buy ratings on both names. She’s also upbeat about the company’s Visa Direct platform, which allows for “push” payments, a popular way for gig economy companies to pay drivers and delivery people. Mastercard has its own version of this, called Send, but Ellis said Visa is investing more in this area and may be benefitting from its larger scale.
The card companies also have different geographical makeups. Visa derived about 45% of volume from the U.S. prior to the pandemic, while Mastercard got about 36%. U.S. card volumes seem to be growing faster than global volumes, partly because of the shift from cash to cards. It’s easier for consumers to make that transition in countries like the U.S. where cards are commonplace and most merchants have the infrastructure to accept them, per Ellis’s analysis.
Visa’s geographic mix may also be proving beneficial as some international travel corridors start to reopen. Both Visa and Mastercard called out a bit of recovery in intra-Europe travel while noting that most international borders remain closed. But Visa sounded slightly more upbeat about current travel dynamics, highlighting that corridors like the U.S., Mexico, and the Caribbean, as well as the Persian Gulf, are starting to reopen.
Wedbush analyst Moshe Katri said that Visa has more exposure to those cross-border corridors outside of Europe where travel activity is doing a bit better. He has outperform ratings on Visa and Mastercard shares.
Mastercard could be due for “a nice trade upward” if international travel resumes upon broad availability of a vaccine, said Mizuho’s Dolev, though he still thinks Visa is “better positioned structurally right now” due to its debit makeup.
Dolev has buy ratings on both stocks.
Mastercard, for its part, is upbeat about a credit rebound. “As travel comes back, you’ll see that reflected in credit,” President Michael Miebach said on the company’s Wednesday earnings call. He stated that Mastercard’s multi-rail strategy allows the company to benefit regardless of how people choose to pay, whether it’s with credit, debit, QR codes, or push payments. “But I do expect credit to come back,” he continued.
Prior to the pandemic, Mastercard’s stock had been outperforming Visa’s for several years, and it remains to be seen whether the dynamics brought on by COVID-19 will alter that pattern. The two have had similar performances so far this year, with Visa’s stock off 4% and Mastercard’s down 5%.
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>>> Is MSCI a Buy?
The company leverages its knowledge and expertise to provide exceptional products to the financial industry while growing its subscription-based revenues year after year.
Motley Fool
by Courtney Carlsen
Sep 11, 2020
https://www.fool.com/investing/2020/09/11/is-msci-a-buy/
MSCI (NYSE:MSCI) provides investment products and financial data to some of the largest asset managers in the world. You might be more familiar with it for its exchange-traded funds (ETFs) than for its own business. But its business is a strong one, and it's been a big winner for investors, up almost 500% over the past five years.
The company has built up years of experience in the industry and an extensive collection of historical data, proprietary equity index data, risk algorithms, and environmental, social, and governance (ESG) data, along with strong intellectual property protection on its indexes. As a result, it has been able to effectively leverage this data and expertise to continually improve the index and ETF products it provides for its clients.
MSCI capitalizes on this domain knowledge through a subscription-based revenue model. In fact, subscription-based revenues make up 74% of its $1.6 billion in total revenue since June 30, 2019. Not only that, but the company is able to keep clients satisfied, as seen by its 90%-plus retention rate over the past five years. All of these factors make MSCI a great company to consider adding to your portfolio.
ETF investing is a strength of MSCI's.
A staple in the financial community
MSCI's global reach attracts many big-name clients, most notably BlackRock. The company provides support tools and services for the global investment community including indexes, portfolio construction, and risk management analytics. MSCI's goal is to help clients understand key drivers of risk and return, which in turn help them build better portfolios.
MSCI's stock market indexes make up about 60% of the company's total business. An index can focus on a general basket of stocks, such as the S&P 500, or on investments that fit a very specific criteria such as ESG stocks. MSCI uses its expertise to continuously innovate its ETF and index products. For example, it offers indexes that target systemic style factors, including volatility, size, momentum, and value. It also offers newer indexes for clients that will track ESG companies as well as ETFs based on on-trend factors, such as smart cities, the digital economy, and other disruptive technologies.
In total, MSCI calculates 226,000 indexes daily and 12,000 indexes in real time, and serves 7,800 clients across 90 countries.
Subscription-based revenues are a key growth driver
MSCI's principal business model is to license annual, recurring subscriptions for the majority of its index, analytics, and ESG products and services for a fee due in advance of the service period. For its index segment specifically, the company sells index data subscriptions that give clients access to MSCI index-linked investment products on a contractual basis, rather than on a usage basis.
In its most recent quarterly earnings report, MSCI reported total 12-month revenue of $1.6 billion, 74% of which came from recurring subscription services. Since the end of 2015, it has seen revenues growth at a compounded annual growth rate of 10%. During that same time period, adjusted earnings per share grew even faster, at a compounded annual rate of 28%.
Recurring subscription revenues continue growing, as well. In the second quarter of this year, the company reported recurring subscription revenue of $309.9 million, a 7.2% increase over the same period last year. This increase was driven thanks to 10% growth in recurring revenue from index products and a 22.7% increase in ESG products. Subscription revenue has continued to grow despite the challenges the economy has faced with COVID-19.
A look at the competition
MSCI has a number of competitors, depending on which operating segment you're looking at. In its index segment, the company competes with S&P Dow Jones Indices -- which is jointly owned by S&P Global and the CME Group -- as well as with FTSE Russell, a subsidiary of the London Stock Exchange Group. In analytics, the company finds competition from Qontigo, BlackRock Solutions, Bloomberg Finance L.P., and FactSet Research Systems.
What sets MSCI apart from its competitors is its extensive database on global markets, proprietary equity indexes, risk algorithms, and ESG. The company relies strongly on intellectual property rights to keep many aspects of its products and services proprietary. Also, its strong relationships with its clients gives it an advantage over competitors, especially since happy clients stay with MSCI for years.
A happy client base
MSCI's retention rate, a metric that tracks the company's ability to retain its customers over time, is consistently 90% and higher over the past five years.
MSCI also continues to grow its subscription run rate. This metric provides an estimate at a particular point in time of the annualized value of the company's recurring revenues under its client contracts for the next 12 months, assuming all contracts are renewed. The subscription run rate is a key operating metric for MSCI because a change in its run rate would ultimately impact its operating revenue over time. New subscription sales have an effect of increasing the company's run rate and operating revenues over time. In the past five years, the subscription run rate has consistently grown between 7% and 10%, and its subscription run rate has actually grown over 10% in each of the past three quarters.
MSCI does a good job of maintaining clientele, a sign that its customers are clearly satisfied with its services and products. Maintaining a high retention rate is essential for its subscription-based revenue model to work.
Is MSCI a buy at today's valuation?
Investors may be concerned that MSCI is too expensive for its current share price. The company has a price-to-earnings (P/E) ratio of 56, which is much above its recent norm between 30 and 40. But its consistent sales and earnings growth and customer loyalty make a strong argument that it deserves its premium.
MSCI is a great company that continues to thrive -- even in the face of the COVID-19 pandemic -- thanks to its subscription-based business model, which makes it a steady and stable investment choice despite its high valuation.
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Mastercard - >>> 3 Top Growth Stocks You Can Buy and Hold for the Next Decade
These growth stocks are potential multibaggers.
Motley Fool
by Neha Chamaria
Oct 17, 2020
https://www.fool.com/investing/2020/10/17/3-top-growth-stocks-you-can-buy-and-hold-for-the-n/
You need three things to buy and hold a stock for a decade: conviction, trust, and patience. You must be strongly convinced that the underlying company has solid growth catalysts for several years to come, trust that management will capitalize on those opportunities and unlock greater shareholder value, and be patient enough to hold onto the stock through volatility to reap rich returns years down the line.
If you think you can do it, here are three top growth stocks riding on three separate megatrends that could make you crazy rich only if you buy and hold them for a decade -- preferably even beyond.
Ride this energy shift
Renewable energy is changing the dynamics of the global energy sector. Among all the energy sources in the U.S., renewable energy grew the fastest, at a nearly 100% clip between 2000 and 2018, according to the Center for Climate and Energy Solutions. Further, renewables are projected to make up 45% of global electricity generation by 2040, up from only about 26% in 2018.
You probably already know how the world's biggest companies are already making the shift. Amazon, for example, strives to power its operations with 100% renewable energy as early as 2025.
Given the backdrop, renewable energy stocks are compelling buys for at least the coming decade. Consider Brookfield Renewable Partners (NYSE:BEPC)(NYSE:BEP), one of the world's largest owners and operators of renewable energy assets, worth $50 billion.
Brookfield typically buys value assets, develops and turns them around, where necessary, to make them profitable, and eventually monetizes mature assets to reinvest the proceeds opportunistically. Through recent acquisitions, the company has expanded significantly into solar and wind, although hydropower generates 66% of its cash flows. Brookfield has an incredible track record of cash flow generation, as evidenced in its dividend growth: The stock's dividends have grown at a compound annual rate of 6% in the past 20 years.
In the coming decade, Brookfield shares could easily generate annualized double-digit returns for three major reasons:
Brookfield has 18,000 megawatts (MW) of renewable capacity under development.
Management is targeting 6%-11% growth in funds from operations.
It aims to grow its annual dividend by 5%-9%.
Brookfield's development pipeline is not only among the largest in the world, but also nearly as large as its current capacity of 19,300 MW. If that should take care of growth, the fact that 95% of its cash flows are contracted should ensure cash flow resiliency, even through tough times. Whichever way you slice it, Brookfield Renewable looks like an easy multibagger stock in the making.
A megatrend poised to mint you money
The war on cash is raging, and it's only a matter of time before nations across the globe become cashless societies, as people ditch paper money for cards and other forms of digital payments. E-commerce, in particular, is a massive tailwind that should bolster the transition, opening up a world of opportunities for Mastercard (NYSE:MA).
Mastercard doesn't issue cards but facilitates transactions made through them on its payments-processing network. It's an incredibly asset-light, high-margin business model, as Mastercard earns a fee on every transaction made using its cards anytime, anywhere in the world. The advantage of network effects here is unmistakable -- the more cards issued by banks and financial institutions, the more value it adds to Mastercard.
Mastercard has 2.6 billion co-branded cards in global circulation and reported $7.3 billion in sales and an operating margin of 51% in the first half of 2020. Although the coronavirus outbreak hit its earnings, Mastercard's long-term story is getting even stronger as digital payments pick up, especially during the COVID-19 pandemic.
Meanwhile, management is savings costs, where possible, while pumping money into high-growth areas like business-to-business solutions and data and analytics. Mastercard's revenue from value-added services like data analytics, consulting fees, cyber and intelligence fees, and loyalty reward fees jumped 23% in 2019.
The global fintech industry is projected to grow exponentially in the coming years. With its solid global presence, partnerships with some of the world's biggest companies, suite of lucrative value-add services, and thirst to grow via acquisitions, Mastercard could earn multibagger returns for investors in the coming decade and beyond.
This e-commerce growth player won't fail you
E-commerce was already booming when the COVID-19 pandemic and ensuing lockdown and homebound lives added fuel to the fire. It was a huge blow for brick-and-mortar stores, as many were forced to shut shop. That's when Shopify (NYSE:SHOP) stepped in, helping merchants of all sizes set up online stores quickly with easy access to everything from inventory management to payments processing.
The results were visible in Shopify's numbers: In its second quarter, new stores created on its platform jumped 71% sequentially and its gross merchandise volume (GMV) soared 112% and revenue 97%, both year over year. GMV, which reflects the total dollar value of orders processed on Shopify's platform in a given period, hit $30.1 billion in the quarter, registering record growth since the company went public in 2015.
Meanwhile, Shopify continues to innovate. In Q2 alone, it launched channels enabling merchants to customize their storefronts within Facebook and Instagram and sell their products online on Walmart. It also expanded its contactless payments in Canada and saw 65% year-over-year growth in merchant cash advances and loans through Shopify Capital. The company also automated some areas of Shopify Fulfillment Network, its new logistics arm that's gotten off to a successful start.
With more than 1 million merchants across 175 countries already on board, Shopify has grown by leaps and bounds in recent years and will likely continue to do so as adoption of e-commerce further gathers steam. For patient investors in the stock, that could mean some solid returns in the coming years.
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>>> American Express Has Challenges Its Rivals Don’t Face, Analyst Says
Barron's
By Carleton English
Oct. 9, 2020
https://www.barrons.com/articles/american-express-has-challenges-its-rivals-dont-face-analyst-51602270567?siteid=yhoof2
Expectations for the card company’s 2021 revenue may be too high, according to Susquehanna Financial.
American Express stock was hit with a rating downgrade as Wall Street worries the card issuer will suffer from continued weakness in travel and entertainment spending.
Shares of the company were up 0.4% in afternoon trading despite the downgrade by Susquehanna Financial analysts to Neutral from Positive. The S&P 500 was up 0.9%,
The analysts expect that the credit-card issuer will have difficulty navigating a world where people are spending more time at home, given that many of the merchants it does business with are also struggling.
The back story. American Express (ticker: AXP) shares have recovered from their March lows but are still down 15% this year. They are lagging behind Visa (V), which is up 9%, and Mastercard (MA), which has gained 17%.
American Express, which is more closely associated with business and travel spending than its peers, has faltered because both of those areas have been hard-hit during the last seven months. There is little sign of activity returning to pre-pandemic levels anytime soon.
Offices have been reluctant to bring workers back on site, and restaurants are operating at reduced capacity. Sports are still largely being played in stadiums with cardboard cutouts of fans. Broadway will remain closed through May 2021, it was announced Friday.
What's new. James Friedman, analyst at Susquehanna, doubts that the card issuer will be able to do much better than the merchants it does business with.
“It would be hard for AXP to do better than their merchants, so consensus ‘21 revenue up 11% looks full to us,” Friedman wrote Friday. He said growth of 7.5% appears more reasonable after looking at projections for the airline, hotel, dining, and retail industries.
He credits American Express for quickly managing its credit risk at the start of the shutdowns, but says it faces other disadvantages. While Visa saw a drop in credit-card spending earlier this year, that was more than offset by an increase in debit-card usage. American Express is primarily a credit-focused business, Friedman wrote.
Looking Ahead. Despite the downgrade, Friedman maintained his target of $110 for the stock price, given that it is not far from Friday’s level near $107. He expects third-quarter revenue will come in at $8.6 billion and that earnings per share will be $1.06, up from previous estimates of 97 cents a share. But looking to 2021, he expects the company will earn $7.43 a share, down from his previous forecast of $7.65.
American Express reports its third-quarter results on Oct. 23.
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Fiserv - >>> 200 Banks and Credit Unions Go Live with Zelle via Fiserv in 2020
Yahoo Finance
October 6, 2020
https://finance.yahoo.com/news/200-banks-credit-unions-live-140000271.html
The Federal Savings Bank and SECU among financial institutions offering Zelle® P2P payments with Fiserv turnkey implementation
As a growing number of consumers have embraced digital payments during the COVID-19 pandemic, financial institutions have added or enhanced person-to-person (P2P) payment capabilities, with more than 200 banks and credit unions going live on the Zelle Network® via Fiserv to date in 2020.
In total, Fiserv, Inc. (NASDAQ: FISV), a leading global provider of financial services technology solutions, has enabled implementation of P2P payments for more than 400 institutions via the Turnkey Service for Zelle. And with more financial institutions choosing to offer Zelle, Fiserv has optimized the path from pipeline to go live so that banks and credit unions can get their customers up and running faster than ever before.
The Federal Savings Bank and SECU are among the financial institutions that have recently added or enhanced their P2P payment capabilities.
"We chose Zelle because we wanted to offer our customers an innovative way to send money quickly via P2P," said Jackie Katz, vice president of Retail Banking at The Federal Savings Bank, a Chicago-based veteran-owned bank with offices across the U.S. "We had been offering a different service, but it did not have the speed or name recognition. Since moving to Zelle via Fiserv, we have seen a nearly 1000% increase in transactions."
"Even prior to COVID-19, our strategy has been to push towards more sophisticated digital technology for our members to allow them the ease of banking from their homes," said Becky Smith, executive vice president, chief strategy and marketing officer at SECU of Maryland, which serves more than 250,000 members throughout the state. "Now that we are in a new environment, being able to offer Zelle has proven to be even more meaningful to our members who have been asking for a service like this."
Zelle allows consumers to send and receive money directly from one U.S. financial institution account to another, typically within minutes when both parties are already enrolled.
"We’ve seen consistent growth in P2P payments every month for the past three years, and the recent pandemic has accelerated that trend," said Tom Allanson, president, Electronic Payments at Fiserv. "The number of financial institutions offering Zelle via Fiserv has more than doubled in 2020, expanding access to easy, fast and secure digital payments at a time people need them most."
In a world moving faster than ever before, Fiserv helps clients deliver solutions in step with the way people live and work today – financial services at the speed of life. Learn more at fiserv.com.
Zelle and the Zelle related marks are wholly owned by Early Warning Services, LLC and are used herein under license.
Additional Resources:
Turnkey Service for Zelle - https://www.fiserv.com/en/about-fiserv/resource-center/brochures/turnkey-service-for-zelle.html
About Fiserv
Fiserv, Inc. (NASDAQ:FISV) aspires to move money and information in a way that moves the world. As a global leader in payments and financial technology, the company helps clients achieve best-in-class results through a commitment to innovation and excellence in areas including account processing and digital banking solutions; card issuer processing and network services; payments; e-commerce; merchant acquiring and processing; and the Clover® cloud-based point-of-sale solution. Fiserv is a member of the S&P 500® Index and the FORTUNE® 500, and is among FORTUNE World’s Most Admired Companies®. Visit fiserv.com and follow on social media for more information and the latest company news.
About Zelle®
Brought to you by Early Warning Services, LLC, an innovator in payment and risk management solutions, Zelle makes it fast, safe and easy for money to move. The Zelle Network® connects financial institutions of all sizes, enabling consumers and businesses to send fast digital payments to people they know and trust with a bank account in the U.S. Funds are available directly in bank accounts generally within minutes when the recipient is already enrolled with Zelle. To learn more about Zelle and its participating financial institutions, visit www.zellepay.com.
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>>> Fiserv Looks Expensive. Is It a Buy?
This fintech is starting to see the fruits of its big merger.
Motley Fool
by Dave Kovaleski
Oct 1, 2020
https://www.fool.com/investing/2020/10/01/fiserv-looks-expensive-is-it-a-buy/
Fiserv (NASDAQ:FISV) has been one of the most consistent and best-performing stocks over the past decade. It has had 11 straight years of positive annual returns through 2019, and over the last 10 years it has posted an annualized return of about 23%.
Last year it made a big move to buy First Data, which gives the company greater scale and broader offerings, as First Data brings complementary capacities. But it also brought in a lot of debt. On top of that, earnings and revenue have been challenged by a global pandemic and resulting recession. At Wednesday's close, Fiserv's stock price was down about 11% on the year.
After a decade of strong growth, Fiserv's multiples are very high, with a price-to-earnings ratio of around 82. Given its muted growth and high valuation, is Fiserv too expensive right now?
Big move to expand and grow
Fiserv is a fintech that develops the technology banks and financial institutions use to process payments and move money. Overall, more than $1 trillion is moved every year via Fiserv's technology. Fiserv has long been one of the few dominant players in the niche core processing industry, with about 37% market share.
The company also provides payment processing at the point of sale through its 2019 acquisition of First Data and its Clover payment system, a competitor of Square. Fiserv hopes to increase its market share long term through this acquisition.
Taking into account the First Data acquisition, which closed in July 2019, adjusted earnings were down 5.8% year over year to $631 million in the second quarter, while adjusted revenue dropped 12% to $3.2 billion. This was primarily due to lower payment revenue and debit transactions, both of which were impacted by the pandemic, explained Robert Hau, CFO and treasurer, on the second-quarter earnings call.
>> Revenue in this segment tends to be driven by transactions and/or accounts, and tends to be fairly resilient in the typical recessionary periods. But this pandemic has been different, for example, debit-oriented transactions, which have historically been very resilient were impacted much more than prior recessionary periods and have solidly improved, consistent with the reopening, since the trough in early April. <<
Earnings were also severely impacted by higher expenses, which were primarily merger-related. This resulted in a drop in adjusted operating margin from 29.7% a year ago to 28.8% at the end of the second quarter. But there are a few good reasons to like where Fiserv is headed.
Fiserv is a buy
The earnings outlook for the rest of the year and beyond is strong. Fiserv expects to finish the year with 10% earnings growth, driven by strong sales growth. Sales were up 38% in the second quarter year over year and 20% year to date. Most notably, the company had two major wins in its credit card processing business, signing on with Atlanticus Holdings and Genesis Financial Services, two providers of consumer credit solutions. Overall, the company added 42 new bank merchant clients in the quarter, with about 70% being competitive takeaways. Since the First Data merger closed, Fiserv has signed more than 160 banks and credit unions and clients with a strong pipeline -- exhibiting the potential strength of this new merger. The company cites its highly configurable processing platform and breadth of integrated solutions as major competitive advantages.
The sales spike generated almost $900 million in free cash flow in the quarter, up 23% year over year. Year-to-date free cash flow is $1.7 billion through the second quarter, up 13%, and about $3.5 billion since the merger. This has allowed the company to pay down some of the debt it brought over from First Data -- about $1.5 billion of its $21.5 billion in long-term debt. It expects to continue to pay down debt next year with its strong free cash flow, along with expense savings from the merger, with an expectation to reach its targeted leverage in the middle of 2021.
As a result of double-digit earnings growth expectations and its debt and expense reduction plans, Fiserv's forward P/E is expected to come down significantly, from about 82 now to around 19 for 2021. That makes Fiserv a great buy right now at this reduced price.
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>>> How Visa Makes Money
Visa's data processing and services segments generate the most revenue
Investopedia
By NATHAN REIFF
Sep 21, 2020
https://www.investopedia.com/how-visa-makes-money-4799098?utm_campaign=quote-yahoo&utm_source=yahoo&utm_medium=referral&yptr=yahoo
Visa Inc. (V) is one of the dominant digital payments brands globally, providing services about 200 nations to individual consumers, merchants, financial institutions, and governments.1
?While best known for its Visa credit card used by millions of consumers, the company provides an unusually broad range of services. That includes authorization, clearing, and settlement services for financial institutions and merchants; and credit, debit, and prepaid card services to consumers and businesses.1?
Visa makes its profits by selling services as a middleman between financial institutions and merchants. The company does not profit from the interest charged on Visa-branded card payments, which instead goes to the card-issuing financial institution.1? Visa so dominates the market that it has only a handful of big rivals, including Mastercard Inc. (MA), as well as digital payments companies such as PayPal Holdings Inc. (PYPL).
KEY TAKEAWAYS
Visa is a digital payments company providing transactions between financial institutions, consumers, merchants, and banks.
The company's data processing operations generate the largest portion of revenue.
Visa's strategy is to aggressively expand its presence in contactless payments, e-commerce, and other digital vehicles.
Visa recently extended its global partnership with PayPal, enabling the expansion of real-time access to funds for individuals and small businesses.
Visa's Financials
Visa's business was adversely impacted during Q3 of its 2020 fiscal year (FY), the three-month period that ended June 30, 2020. The company reported net income of $2.4 billion on $4.8 billion of net revenue. Net income fell 23.5% while net revenue fell 17.2% compared to the same quarter a year ago.2?
Net revenue from Visa's U.S. business, which comprises about 49% of total net revenue, fell 8.0% compared to the year-ago quarter. Net revenue from international sources, which accounts for the remaining 51% of total net revenue, fell 24.5%. Visa indicated that these revenue declines were mostly due to year-over-year (YOY) changes in payments volume, cross-border volume, and processed transactions, all of which were impacted by COVID-19.3?
Visa's Business Segments
Visa reports as a single segment, which is Payment Services. But it routinely divides its revenue into four subsegments, which are the major generators of revenue for the company.4? These segments are: Service Revenue, Data Processing Revenue, International Transaction Revenue, and Other Revenue.4? Visa describes these subsegments as "components" of net revenue, but they are reported gross of client incentives. The sum of the revenue totals for each segment equals gross revenue of about $6.4 billion for Q3 FY 2020. Visa's net revenue of $4.8 billion for the quarter is equal to that gross revenue figure minus client incentives.5?
Service Revenue
Visa's service subsegment consists of revenue from services provided to support client usage of Visa's payment services. This is separate from the authorization, clearing, and settlement related to the company's payment services, which is included elsewhere.6? In Q3 FY 2020, Visa's service revenue was $2.4 billion, or about 38% of the company's total gross revenue. This is up 0.2% YOY.5?
Data Processing Revenue
Visa's data processing revenue includes all revenue generated as a result of the company's clearing, settlement, authorization, network access and similar services.6? In Q3 FY 2020, data processing revenue accounted for the largest portion of the company's gross revenue: $2.5 billion or about 40%. This figure is down 5.1% YOY.5?
International Transaction Revenue
Visa is heavily involved in cross-border transaction processing and currency conversion, and these activities generate revenue in the subsegment of international transaction revenue.6? In Q3 FY 2020, international transaction revenue was $1.1 billion, or more than 17% of gross revenue. Revenue for this component was down 44.3%.5?
Other Revenue
Visa also earns revenue from license fees, value-added services, account holder services, and more. These sources are grouped together as Other.6? At $314 million or nearly 5% of Visa's Q3 FY 2020 gross revenue, the Other component accounts for the smallest portion of revenue. Other revenue fell 8.2% YOY.5?
Visa's Recent Developments
Visa recently announced that it extended its global partnership with PayPal. The extension of the partnership will enable the expansion of real-time access to funds for consumers and small businesses that are sending or receiving money using PayPal, Venmo, or Xoom. It will expand PayPal's Instant Transfer services, which leverages Visa Direct for real-time payments.7?
How Visa Reports Diversity & Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Visa and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Visa releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whether Visa discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ?. It also shows whether Visa breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.
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>>> Mastercard vs Visa: Which Financial Giant Makes A More Compelling Investment?
Yahoo Finance
September 21, 2020
https://finance.yahoo.com/news/mastercard-vs-visa-financial-giant-090351615.html
The pandemic-led lockdowns and social distancing restrictions hurt spending on several discretionary goods, travel, entertainment and fuel, thus impacting payment network giants Visa, Mastercard, American Express and Discover. However, these companies are experiencing improved metrics with the easing of lockdowns.
Moreover, the pandemic has created an opportunity for payment networks due to a surge in e-commerce and the preference for contactless payment options. Last month, Mastercard revealed the results of its survey of small businesses across North America and said that 76% of these companies indicated that the pandemic prompted them to become more digital with 82% changing how they send and receive payments.
The TipRanks’ Stock Comparison tool will help us place Mastercard and Visa alongside each other and see which of these leading payment companies offers a better investment opportunity.
Mastercard (MA)
Leading financial services company Mastercard has a presence in over 210 countries and serves customers through 2.2 billion Mastercard branded cards and 417 million Maestro cards. COVID-19’s impact on consumer spending reflected in the company’s 2Q revenue, which declined 19% Y/Y to $3.3 billion and led to a 28% decline in adjusted EPS to $1.36.
However, one positive aspect in the second quarter was the 12% rise in other revenues to $1.1 billion due to growth in the company’s Cyber and Intelligence as well as Data and Services solutions.
As per Mastercard’s 3Q business update, the company is experiencing continued moderate improvements. Notably, switched transactions (reflects the number of transactions initiated, authorized, cleared and settled through Mastercard network), grew 5% in the week ending August 28 compared to 3% in the week ending July 21. Cross-border volume was down 35% in the week ending August 28 compared to a 40% decline in the week ending July 21.
Meanwhile, the company continues to pursue opportunities in priority areas such as open banking, real-time payments, cyber and intelligence Solutions and B2B themes. In June, Mastercard announced an agreement to acquire Finicity, a leading provider of real-time access to financial data and insights, to bolster its open banking platform.
Last month, Mastercard expanded its partnership with TransferWise to allow the issuance of cards in any country where Mastercard is accepted and TransferWise is licensed. Mastercard is also enabling checkout-free shopping through the rollout of its Shop Anywhere platform with several retailers from October.
Aside from Shop Anywhere, another frictionless solution that that company introduced is the AI Powered Drive Through platform, provided in partnership with SoundHound Inc. and Rekor Systems. This new platform will help fast-food and quick-serve restaurant brands speed up a drive-thru or drive-in interaction through vehicle recognition, voice ordering, and artificial intelligence.
Mastercard has also accelerated its Crypto Card Partner Program and has granted Wirex a principal membership license, making it the first native cryptocurrency platform to issue Mastercard payment cards. (See MA stock analysis on TipRanks)
On Sept. 11, Tigress Financial analyst Ivan Feinseth reiterated a Buy rating for Mastercard, stating “Near term COVID-19 pandemic-driven weakness will be overcome by an acceleration in electronic payment and service adoption, which will drive further acceleration in Business Performance trends.”
The Street is also bullish about Mastercard and has a Strong Buy consensus based on 22 Buys, 5 Holds and no Sell ratings. The stock has risen 12% so far this year and a possible upside of 6.8% lies ahead based on the average analyst price target of $358.
Visa (V)
Visa, the global payments industry leader with a vast presence in over 200 countries, could not escape the COVID-19 led weakness in transactions and posted a 17% decline in its revenue of $4.8 billion for the third quarter of fiscal 2020, which ended June 30. Adjusted EPS fell 23% Y/Y to $1.06.
Earlier this month, Visa reported a 7% Y/Y rise in its August US payments volume which was slower than the 8% growth in July, reflecting the impact of the expiration of the elevated unemployment benefits. Meanwhile, global processed transactions grew 3% in August compared to a 1% growth in July due to accelerating domestic transactions triggered by the easing of social distancing restrictions. Cross-border volume (excluding intra-Europe transactions) was down 43% in August compared to a 44% fall in July.
Meanwhile, Visa is capturing the demand for contactless payments amid the COVID outbreak through its tap-to-pay solutions. In the US alone, Visa added over 80 million contactless cards in the first six months of this year. It expects tap-to-pay to accelerate post-COVID when consumers start going back to the office and conduct smaller transactions for their commute, pay transit fares, and buy food and drinks.
Also, the rapid shift to e-commerce works well for Visa as its share of digital commerce is about three times greater than the physical point of sale.
The company has been entering into strategic partnerships to expand in key growth areas. It has partnered with UK-based fintech Conferma Pay to integrate Visa virtual cards in the Conferma Pay mobile app. The collaboration will allow companies to provision virtual Visa commercial cards to employees' digital wallets, enabling tap-to-pay and simplify expense reimbursement.
In January, Visa announced a $5.3 billion agreement to acquire fintech Plaid, which has products that enable consumers to share their financial information with many apps and services such as Acorns, Betterment, Chime, Transferwise and Venmo. Visa expects to complete this deal by the year-end.
To capitalize on the accelerated shift to digital payments amid the pandemic, Visa recently extended its global partnership with PayPal. The expanded partnership will enable consumers and small businesses to move their money faster through PayPal and Visa Direct capabilities. (See V stock analysis on TipRanks)
Last month, Mizuho analyst Dan Dolev initiated coverage of Visa with a Buy rating and a price target of $250. The analyst believes that card penetration is the key driver of Visa's volume growth, and channel work points to accelerating card penetration and a boost to US volume growth. He also believes that the long-term stability of the company's "best-in-class" terminal margins should merit mid-teens revenue multiples.
Likewise, the Street is bullish about Visa with 16 Buys, 2 Holds and no Sell ratings adding to a Strong Buy consensus. The stock has risen about 8% year-to-date and the average analyst price target of $222.33 reflects an upside potential of 10% in the coming months.
The better financial play
Both Mastercard and Visa have strong business models that stand to benefit in the digital world. They are on the path to recovery as economies are reopening- though COVID-related impact on travel and other businesses continues to be a major drag on cross-border volumes.
Mastercard has a dividend yield of 0.48% compared to Visa’s yield of 0.59%. Moreover, a lower valuation multiple and higher upside potential ahead as indicated by the TipRanks’ Stock Comparison tool make Visa a more attractive investment currently.
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Visa - >>> 3 Warren Buffett Stocks You Can Buy and Hold Forever
These three very different companies have one thing in common: Each can continue to grow for decades to come.
Motley Fool
by Danny Vena
Sep 16, 2020
https://www.fool.com/investing/2020/09/16/3-warren-buffett-stocks-you-can-buy-and-hold-forev/
Let's get this out of the way right up front: Forever is a very long time and it almost seems disingenuous to suggest it. In all honesty, nobody knows what will happen tomorrow or a year from now, let alone in five or ten years' time -- or forever.
That said, Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) CEO Warren Buffett has said, "Our favorite holding period is forever." And given his enviable track record, investors could do far worse than following his example. Since Buffett took the helm of Berkshire Hathaway in 1965, the company has had a compound annual growth rate of more than 20%, and by the end of 2019, its total returns have grown to a whopping 2,744,062%.
There are a number of criteria investors can use to increase the likelihood that a stock will still be successful decades from now. Buying a firmly entrenched industry leader, a company with a track record of innovation, or one with the ability to adapt to changing conditions can all improve your chances of success. Let's look at why Visa (NYSE:V), Amazon (NASDAQ:AMZN), and Apple (NASDAQ:AAPL) represent great "forever" stocks.
1. Payments titan Visa
When it comes to dominating the payments industry, Visa (NYSE:V) simply has no equal, accounting for more than 53% of U.S. credit card network purchase volume, totaling nearly $2 trillion in payments processed -- more than all three of its biggest competitors combined.
The company has another huge advantage over its chief rivals, particularly in times of economic uncertainty: While it processes payments, it's not a lender. Unemployment rates, while showing marked improvement in recent months, are still near record highs, raising the risk of credit delinquency and default.
Not content to rest on its laurels, Visa recently made a big bet on fintech, spending more than $5 billion to acquire financial technology provider Plaid. While the company wasn't a household name, many have used it without knowing it, as its technology secures users' financial information while connecting their bank accounts to a growing number of financial apps.
There's a whole big world out there and Visa still has international markets to conquer. The company estimates that cash is still used in annual purchases of more than $21 trillion and there are nearly 2 billion adults who don't yet have a payment account, showing the enormity of the opportunity that remains.
Buffett's still a believer, holding nearly 10 million Visa shares, worth almost $2 billion.
2. It's still Day One at Amazon
Amazon (NASDAQ:AMZN) dominates not one, but two industries: e-commerce and cloud computing.
While estimates vary, eMarketer contends that Amazon will account for 38% of online sales in the U.S. this year, while its nearest competitor Walmart will top out as less than 6%. Those estimates could prove conservative, as more consumers made the move to e-commerce in the midst of the pandemic. Amazon has also been working to increase its international penetration in recent years, so it too has worlds yet to conquer.
When it comes to cloud computing, Amazon popularized the notion and was among the first to recognize the massive opportunity. Being one of the first out of the blocks gave Amazon an advantage it still enjoys today. Amazon Web Services is still the undisputed leader in cloud computing, with a 33% share of the market -- more than its next three competitors combined, according to estimates by Synergy Research Group. It's also extremely lucrative, accounting for 25% of Amazon's sales and 65% of its operating income for the first half of 2020.
It may be the company's culture of innovation and expansion that makes it a forever stock, however. While Amazon began as an online bookseller, it has evolved into the "everything store." In addition to its e-commerce empire, the company has a sprawling logistics and delivery operation, a growing footprint in physical retail, leading streaming video and music offerings, and a massive artificial intelligence operation, including a growing ecosystem of Alexa-powered devices. Not to mention that Amazon has quickly become the third-largest digital advertiser in the country. And its Amazon Go stores -- which eliminate the need for cashiers -- are just getting started.
Buffett famously said that he regretted not investing in Amazon earlier. "I'm a fan [of Amazon], and I've been an idiot for not buying," Buffett said in an interview. It was one of Buffett's trusted money managers Todd Combs or Ted Weschler who eventually pulled the trigger.
That position has grown to more than half a million shares, valued at $1.66 billion.
3. Apple's prescient pivot
Apple is another company that has given new meaning to "industry-leading." While most companies would be happy with just one groundbreaking product, Apple has had several over the years. No competitor came close to the dominance of the iPod, a product Apple famously cannibalized with the introduction of the iPhone.
While the company has never been the global market share leader, iPhone has the distinction of gobbling up the majority of the profits. Apple captured about two-thirds of all profits in the global handset market last year, more than its next three competitors combined.
The company has other industry-leading products as well. The Apple Watch began as a sideline when it was introduced back in late 2014, but in just five short years, the device outsold the entire Swiss watch industry. Apple's wireless AirPods are another product line that dominates the market, accounting for nearly half of all sales in the category in 2019.
Apple is no longer counting on its fan-favorite products to fill its coffers. The company has worked to rapidly expand its services offerings over the past several years, with streaming music and video, mobile gaming, and digital payments, to name just a few. That strategy is bearing fruit, as services has grown to nearly 19% of Apple's trailing-12-month revenue, up from less than 12% just four years ago.
It's also worth noting that Apple is Buffett's largest holding, representing nearly half of Berkshire Hathaway's invested assets. "We bought about 5% of the company. I'd love to own 100% of it," Buffett said in a 2018 interview. "We like very much the economics of their activities. We like very much the management and the way they think." That's high praise indeed coming from one of the world's most successful investors.
But seriously, forever?
When it comes to investing, there are simply no guarantees, but choosing industry leaders with ongoing opportunities will certainly increase the likelihood of success. While Buffett's favorite holding period is forever, even the storied investor has sold distressed companies in beaten-down industries, with 2020 seeing his biggest turnover in years.
That said, it takes a certain caliber of company to become an industry leader, and it's even rarer to find those that simply dominate the competition. Each of these top-notch companies has what it takes to succeed for years and perhaps even decades to come.
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>>> Visa and PayPal Deepen Ties for Instant Money Transfer
Zacks
September 11, 2020
https://finance.yahoo.com/news/visa-v-paypal-deepen-ties-164304093.html
Visa Inc. V and PayPal Holdings, Inc. PYPL have expanded their partnership, which in turn, extends the latter’s Instant Transfer services to the global markets, thus enabling fast domestic and cross-border digital payments.
PayPal’s instant transfer services leverage Visa Direct’s real-time payment capabilities. The deal extension comes at a time when real-time money transfer and payment settlement became the need of the hour. This requirement came up in the wake of COVID-19 breakout, which left consumers as well as small businesses cash starved. In such circumstances, instant access to funds, which can restore financial flexibility to those in need, is of utmost significance.
Visa and PayPal’s deal will allow family members residing in two different countries to transfer funds instantly. Also, small businesses can pay and receive payments on a real-time basis.
The magnitude of the requirement of real-time payment capability can be gauged from the fact that 76% of U.S. SMBs reported struggling with cash flow shortages in the last few months. 91% of SMBs expressed interest in real-time settlement capabilities.
Also, Visa Direct experienced an almost 80% increase in transactions in the Person-to-person (P2P) payment category in the United States during third-quarter 2020, which reflects the popularity of real-time payments solution.
Via this deal extension, PayPal will be able to widen the global white label Visa Direct payout services through PayPal and its Braintree, Hyperwallet and iZettle product solutions. Moreover, eligible PayPal customers can pay and get paid by friends, family and businesses, and move money quickly from their PayPal, Xoom and Venmo accounts through Visa Direct to their eligible Visa cards.
The partnership between Visa and PayPal dates back to 2016 when both came together to provide an improved and a more seamless payment experience for Visa cardholders and offered greater choice to consumers to pay with the PayPal and Venmo wallets.
A couple of years later, in 2018, Visa and PayPal stretched their alliance to accelerate the adoption of digital and mobile payments in Canada.
The strengthened collaboration with PayPal underscores Visa’s efforts to tap a meatier market share of the payments space, which is undergoing digital transition. The global pandemic accelerated led to this change and the trend is expected to surge even after the health emergency dies down.
Last year, another company in the same space, Mastercard Incorporated MA, extended its pact with PayPal Holdings, which allowed the former to provide its Instant Money Transfer service in Singapore and across multiple markets in Europe.
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Visa - >>> 4 Unstoppable Stocks to Buy With $2,500
It's easy to build wealth when you own top-notch stocks like these.
Motley Fool
Sean Williams
Sep 14, 2020
https://www.fool.com/investing/2020/09/14/4-unstoppable-stocks-to-buy-with-2500/
Investing in 2020 should really come with a disclaimer. The past six-plus months have been one of the most volatile periods on record, with the benchmark S&P 500 losing 34% of its value in less than five weeks, then regaining everything that was lost (and some) in the subsequent five months. This year has undeniably taught investors how fruitless it is to try to predict short-term market movements.
But at the same time, it's been a great year for long-term investors to buy into great companies on the cheap. With volatility picking back up over the past week and change, opportunity has come knocking yet again for long-term investors looking to buy into the market's most unstoppable stocks.
Best of all, long-term investors don't need to be rich to eventually become wealthy. If you have $2,500 that you can spare, which won't be needed to pay bills or cover emergencies, you have more than enough to buy the following four unstoppable stocks.
Alphabet
If you can get any sort of meaningful discount on shares of Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), the parent company of Google and YouTube, I strongly suggest you consider taking it.
As you can imagine, Alphabet has been clobbered by the coronavirus disease 2019 (COVID-19) pandemic. As an ad-based business, Alphabet has seen companies of all sizes pull back on their spending, which led the company to report its first year-on-year sales decline since going public.
However, long-term investors would be smart not to read too much into this data. As a whole, GlobalStats finds that Google has accounted for between 92% and 93% of all online internet search (on a monthly basis) over the trailing year. It's the clear go-to when it comes to search ad placement, which means it'll boast considerable pricing power during the many long periods of economic expansion.
Alphabet's cloud infrastructure segment, Google Cloud, is also a stealthy fast-growing segment. It's no secret that cloud subscription margins are much higher than ad-based margins. With Google Cloud raking in over $3 billion in the second quarter and accounting for nearly 8% of Alphabet's total sales, it's going to be responsible for a significant uptick in the company's operating cash flow in the years that lie ahead.
Facebook
You don't have to get cute and find the hidden gem in the social media space. Just consider buying Facebook (NASDAQ:FB), which is far and away the most unstoppable social media presence.
Like Alphabet, Facebook's business model is driven by ad revenue. But in Facebook's case, ads make up an even larger percentage of total sales. This means COVID-19 concerns and recent questions about Facebook's filtering of hate speech have adversely impacted the company's near-term results.
And yet, despite the worst quarter for the U.S. economy in decades, Facebook still logged an 11% year-on-year sales increase during the June-ended quarter. That should tell you something about how important Facebook and its family of social media assets are to the advertising world.
As of June 30, Facebook had 2.7 billion monthly users, as well as 3.14 billion family monthly active users (family accounts include owned assets Instagram and WhatsApp). There's simply nowhere else that advertisers can go where they're going to get access to at least 2.7 billion targeted eyeballs, and Facebook knows it.
Furthermore, the company has only monetized a portion of its assets. The vast majority of current sales are derived from ad revenue on Facebook and Instagram, with Facebook Messenger and WhatsApp not yet monetized in any meaningful way. When the company does monetize these platforms, as well as rolls out additional initiatives beyond Facebook Pay, we could witness sky-high sales growth from a megacap company.
Teladoc Health
If you're not closely watching Teladoc Health (NYSE:TDOC), you're missing the blossoming of an industry giant and a company on the cutting edge of precision medicine.
As the name implies, Teladoc is a leading telemedicine company in the healthcare sector. It was already seeing a boon in businesses well before the pandemic struck. However, keeping sick and immunocompromised people out of hospitals and doctor's offices has made virtual visits that much more important. After generating $20 million in full-year sales in 2013, Teladoc might hit $1 billion this year, and top $2 billion by 2023.
Additionally, you should understand that telemedicine visits are a benefit to all parties. It puts less time constraint on physicians, provides convenience for the patient, and happens to be cheaper than in-office visits for health insurance companies. We're really just scratching the tip of the iceberg after Teladoc registered 2.8 million visits during the June-ended quarter.
Also, don't overlook Teladoc's transformative cash-and-stock merger with applied health signals company Livongo Health (NASDAQ:LVGO). Livongo gathers copious amounts of data on patients with chronic illnesses and, using artificial intelligence as an aid, sends these folks tips and nudges to incite lasting behavioral changes. What Livongo is doing is clearly working, as the company has delivered three consecutive quarterly profits and continues to double its year-over-year Diabetes member counts.
When combined, this duo will be unstoppable in the healthcare space.
Visa
It's rare when payment-processing giant Visa (NYSE:V) isn't kicking tail and taking names, but when those short periods of time do occur, it's important for long-term investors to pounce.
About the only way this freight train can be slowed down is during a recession. Visa witnessed gross dollar volume on its network decline in 2009 from the previous year, and it'll likely face that same fate in 2020 with the coronavirus pandemic briefly pushing the U.S. unemployment rate to levels not consistently seen since the 1930s. But it's going to be impossible to keep this well-oiled money machine down for long.
Working in Visa's favor is the fact that its success is tied to U.S. and global economic growth. Even though economic contractions and recessions are a natural part of the economic cycle, periods of expansion tend to last considerably longer than recessions.
Also, understand that Visa's sole purpose is to aid in the facilitation of payments. Unlike some of its competition, it's not a lender. The big advantage of staying away from lending is that it means no direct exposure to rising loan delinquencies during periods of contraction or recession. This is why Visa's gross margin is often at or above 50%.
Visa has the highest credit card market share by network purchase volume in the U.S., and more than doubles the share of its next-closest competitor. It's absolutely unstoppable in the payments space.
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>>> Visa Strikes a Deal With a Fintech for Digital Wallet Rollout in Europe
The payment card giant is hooking into the Norwegian company Vipps' contactless payment system.
Motley Fool
by Eric Volkman
Sep 7, 2020
https://www.fool.com/investing/2020/09/07/visa-strikes-a-deal-with-a-fintech-for-digital-wal/
Visa (NYSE:V) continues to push more deeply into the jungle that is fintech. The world's dominant payment card processor has signed a deal with a Scandinavian company in the digital wallet sphere.
Through the arrangement, Visa said in a press release last week, "Visa's clients and partners will now be able to take advantage of the Vipps platform to create their own digital wallets and offer customers new ways to pay, be paid and manage their money."
This will apply to its cardholders in Europe; the company did not mention when and if the arrangement would be expanded to other parts of the world.
Neither the terms nor the price of the deal were made public.
Its timing seems appropriate. Contactless commerce -- either via online purchasing or with specialty cards that don't need to be swiped or read -- has surged during the coronavirus pandemic. This has added momentum to an existing global migration to digital means of payment. In its press release, Visa said that more than 75% of payments made through its branded cards are contactless these days.
Vipps' core product is an app that facilitates consumer payments; users can send and receive money to and from various sources. It launched in 2015, and according to Visa, currently has 85% market penetration. In its native Norway, it has 3.7 million users out of a total population of roughly 5.4 million.
"Today, the ability to pay digitally and make cashless payments in-stores, online, in-app, is no longer just a convenience but a necessity," Visa quoted Antony Cahill, its managing director for European regions, as saying. "As the leading payment brand, we are keen to make sure consumers and businesses have access to secure, digital commerce, regardless of where they live or what mobile device they have."
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>>> Apple’s Bet on a Cashless Future Could Pay Big Dividends for Investors, Analyst Says
Barron's
Aug. 28, 2020
https://www.barrons.com/articles/apples-bet-on-a-cashless-future-could-pay-big-dividends-for-investors-analyst-says-51598657910?siteid=yhoof2&yptr=yahoo
Apple’s Bet on a Cashless Future
Aug. 28: Like “jet packs” and “flying cars,” a frictionless future without physical money has been a staple of pundits’ and authors’ sci-fi speculations since the first ATMs were installed in 1969....
However, the fact remains: In 2020, cash is still very important to Americans’ everyday lives. According to Federal Reserve numbers, while 86% of people report using “plastic” at least sometimes, nearly 13% of economic activity in the U.S. is still in cash. That’s roughly $2.7 trillion dollars, and it’s “money on the table” for fintech innovators. Traditional credit-card companies and banks haven’t shown much interest in going after it.
But there’s a company with the vision to see this as a $2.7 trillion opportunity for the taking....I’m talking about Apple (ticker: AAPL). The iPhone is still very important—and could become more so with the 5G model on the horizon—but Apple’s Apple Pay fintech and its other innovations have become bigger and, indeed, more important contributors to Apple’s bottom line since about 2014. Apple watchers like me were excited earlier this month when the company spent $100 million to acquire a small start-up called Mobeewave. It didn’t generate many headlines, but in my view, this is a critical step on the road to another trillion in Apple’s market cap.
The Mobeewave tech that Apple now owns specializes in near-field communication, or NFC, a set of communications protocols that two electronic devices can use to talk over a distance of just 1.5 inches or less. It has an array of applications—it can be used for identification and authentication and keyless entry, for instance.
But perhaps its biggest and most important application is in the growing field of contactless payments. They are coming of age at an interesting time: a novel coronavirus pandemic. The digital-payment market is expected to more than double to $87.6 billion by 2023 and, beyond that, to $98 billion by 2027. A great deal of that business will go to companies like Apple and Square (SQ)....
A recent study by Visa, conducted during the pandemic, revealed the unsurprising result that two of every three American consumers would now prefer contactless, cashless transactions. It’s clear to me that these consumers and the businesses that serve them will practically beat a path to Apple’s door.
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Jack Henry & Assoc - >>> 1st United Credit Union Builds Relationship with Jack Henry
PR Newswire
August 27, 2020
https://finance.yahoo.com/news/1st-united-credit-union-builds-120000116.html
Credit union enhances its core and digital strategy to elevate the financial offerings, service experience available to members
MONETT, Mo., Aug. 27, 2020 /PRNewswire/ -- Jack Henry & Associates, Inc.® (NASDAQ: JKHY) is a leading provider of technology solutions and payment processing services primarily for the financial services industry. Its Symitar® division today announced that California-based 1st United Credit Union has selected Episys® as well as the Banno Digital Platform™ to deliver a personal, human-centered service that puts its members first.
1st United recognized the need for flexibility and customization beyond what its current core could offer. Being situated in the Silicon Valley area, the credit union's members have high expectations for financial services that are innovative, intuitive, and instantly ready to use. With Jack Henry, 1st United will gain a distinctly configurable platform technology that is open to integration through a single API gateway to provide better feature functionality at a faster speed that continuously evolves to make way for the future of banking.
Joanna Uhl, chief information officer at 1st United, said, "Jack Henry has the experience, stability and proven conversion successes to support our credit union's needs for the long term. The team is willing to do whatever it can to deliver on the products and services our members desire. That attitude pours into the technology. We know that Jack Henry will continue to invest in moving its platforms forward, taking us with them and never letting any feature functionality go stale. As we look toward the future, we know anything is possible as long as you have great solutions and the right people behind them."
The $1.2 billion-asset credit union will run its core through Jack Henry's private cloud environment. 1st United expects to see efficiency gains from day one for its team, which will directly translate into more offerings and enhanced service for its members. The credit union is particularly excited to engage in the PowerOn Marketplace® to create and share custom core content with other credit unions. Its conversion to Jack Henry will also provide a new level of integration, particularly across services like bill pay, which will help elevate adoption and usage among members.
For similar reasons, 1st United chose the Banno Digital Platform for the personal, member-centered experiences it wanted for its members. Uhl added, "There is a unique passion and foresight poured into this digital suite. The intuitive nature of it makes digital interaction easy and enjoyable. We have been trying to get more members engaged with us through various remote services while still providing the personal service we have become known for, and the availability of this platform will help advance that goal."
Shanon McLachlan, president of Symitar, commented, "Being in the financial services industry for more than four decades, we've accumulated valuable knowledge and resources that we're proud to share with our partners and client community. It's also shown us the need to constantly innovate and remain forward looking, delivering products and services that help credit unions build their membership and become future-ready."
About Symitar
Symitar, a division of Jack Henry & Associates, Inc.®, is the leading provider of integrated computer systems for credit unions of all sizes. Symitar has been selected as the primary technology partner by more than 800 credit unions, serving as a single source for integrated, enterprise-wide automation and as a single point of contact and support. Additional information is available at www.symitar.com.
About Jack Henry & Associates, Inc.
Jack Henry (NASDAQ:JKHY) is a leading provider of technology solutions primarily for the financial services industry. We are an S&P 500 company that serves approximately 8,700 clients nationwide through three divisions: Jack Henry Banking® supports banks ranging from community banks to multi-billion-dollar institutions; Symitar® provides industry-leading solutions to credit unions of all sizes; and ProfitStars® offers highly specialized solutions to financial institutions of every asset size, as well as diverse corporate entities outside of the financial services industry. With a heritage that has been dedicated to openness, partnership, and user centricity for more than 40 years, we are well-positioned as a driving market force in future-ready digital solutions and payment processing services. We empower our clients and consumers with the human-centered, tech-forward, and insights-driven solutions that will get them where they want to go. Are you future ready? Additional information is available at www.jackhenry.com.
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>>> Federal Bank Chooses Fiserv to Support Launch of Their First Independent Credit Card
Business Wire
August 12, 2020
https://finance.yahoo.com/news/federal-bank-chooses-fiserv-support-035600475.html
Proven platform, market-ready functionalities and business process outsourcing reduce the need for heavy capital investment and customization
Federal Bank (NSE: FEDERALBNK), a leading private sector bank in India, has chosen Fiserv, Inc. (NASDAQ: FISV), a leading global provider of payments and financial services technology solutions, to enable the digitization of the bank’s end-to-end card issuance and processing cycle, and support the launch of the Federal Bank credit card. The bank will also outsource associated operational processes to Fiserv.
With a strong retail and remittance business in India, Federal Bank was looking for a flexible and scalable technology and business process outsourcing (BPO) solution to support the launch and subsequent growth of its credit card business. The bank will utilize FirstVision™ from Fiserv, an end-to-end managed services solution that enables card issuing and processing with global economies of scale and integrated capabilities that span the card lifecycle. The integrated technology and BPO solution reduce cost of ownership and provide a seamless extension to the bank’s operations.
"At Federal Bank, we have a track record of deploying the best digital infrastructure to cater to our customers." says Shalini Warrier, Executive Director and Business Head - Retail at Federal Bank. "Fiserv supports our digital priorities and expansion plans. Their world-class technology platform and extensive local experience position us to offer an enhanced digital experience to our customers."
The service-oriented architecture and open APIs of FirstVision facilitate rapid application development, enabling new capabilities to be brought to market more quickly and at a lower cost, while helping to ensure local compliance.
For financial institutions looking for scalable and cost-effective technology and operational support as they grow, the combination of a software as a service (SaaS) solution and business process outsourcing offers a sustainable model in competitive market environments like India.
"The feature-rich card processing platform and operational tools provided by Fiserv help reduce the need for extensive up-front investments," said Nilufer Mullanfiroze, Country Head – Deposits, Cards & Personal Loans, Retail Banking at Federal Bank. "This allows us to stay agile and focus our resources on delivering relevant solutions and excellent services to our customers as we continue to grow the business."
"The partnership with Federal Bank reinforces our market leadership in providing locally relevant, digital-first solutions to financial institutions in India," says Ivo Distelbrink, EVP and head of Asia Pacific at Fiserv. "Financial institutions in India are undergoing rapid digital transformation, and have further accelerated their digital agenda during the current pandemic. Fiserv stands ready to provide the right combination of digital capability, infrastructure, personnel and security to help our clients adapt, differentiate and operate more efficiently."
In a world moving faster than ever before, Fiserv helps clients deliver solutions in step with the way people live and work today – financial services at the speed of life. Learn more at fiserv.com.
About Federal Bank
Federal Bank (NSE: FEDERALBNK) is a leading Indian private sector bank with a network of 1,263 branches and 1,937 ATMs/Recyclers spread across the country. The Bank’s total business mix (deposits + advances) stood at ? 2.76 Lakh Crore as at March 31, 2020 and it has earned a net profit of ? 1,543 Crore for FY20. Capital Adequacy Ratio (CRAR) of the Bank, computed as per Basel III guidelines, stood at 14.35%. Federal Bank has its Representative Offices at Dubai and Abu Dhabi that serve as a nerve centre for Non Resident Indian customers in the UAE. The Bank also has an IFSC Banking Unit (IBU) in Gujarat International Finance Tec-City (GIFT City). Federal Bank is transforming itself, keeping its principles intact, into an organization that offers services beyond par. It has a well defined vision for the future as a guidepost to its progress.
About Fiserv
Fiserv, Inc. (NASDAQ: FISV) aspires to move money and information in a way that moves the world. As a global leader in payments and financial technology, the company helps clients achieve best-in-class results through a commitment to innovation and excellence in areas including account processing and digital banking solutions; card issuer processing and network services; payments; e-commerce; merchant acquiring and processing; and the Clover® cloud-based point-of-sale solution. Fiserv is a member of the S&P 500® Index and the FORTUNE® 500, and is among FORTUNE World’s Most Admired Companies®. Visit fiserv.com and follow on social media for more information and the latest company news.
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>>> Apple Isn’t Just a Tech Stock. It’s a Play on Payments.
Barron's
by Daren Fonda
Aug. 12, 2020
https://www.barrons.com/articles/apple-isnt-just-a-tech-stock-its-a-play-on-payments-51597254156?siteid=yhoof2&yptr=yahoo
If you don’t own shares of Apple for its iPhones, iPads, wearables, or services, here’s one other reason to hold the stock: It’s becoming a player in fintech.
Apple (ticker: AAPL) is making inroads into financial services with its recently launched credit card, co-branded with Goldman Sachs Group (GS). Apple Pay is gaining traction as more consumers use their phones to pay for purchases in stores, avoiding handling cash in the pandemic. Indeed, Apple owns the platform and device that millions of people are increasingly using to send money and conduct e-commerce—making it an emerging competitor in financial services.
“I own Apple primarily because they’re becoming a large player in the payments space,” says Dave Ellison, manager of the Hennessy Large Cap Financial Fund (HLFNX), which has Apple as a top-10 holding. “Apple controls the phone and you want to buy stocks where business happens on the phone.”
Apple is one of several financial technology stocks that Ellison owns in his fund. His top 10 holdings consist almost entirely of fintech: PayPal (PYPL), Square (SQ), Visa (V), Mastercard (MA), and payment-processing firm Fidelity National Information Services (FIS). Only one big commercial bank, Citigroup (C), makes his list.
“I like the companies that are moving money around, rather than the guys that are buying and selling money,” Ellison said in an interview, referring to banks, whose primary business is taking deposits and making loans.
Fintech stocks aren’t for the value-minded. PayPal, one of the year’s hottest stocks, trades at 42 times estimated 2021 earnings. Square, another superstar, goes for 118 times. Visa and Mastercard haven’t performed as well this year—partly because transaction volumes are down and cross-border revenues have fallen sharply—but they still fetch 32 and 38 times, respectively. Apple is at 28 times estimated 2021 profits, and Fidelity National goes for 21 times forward earnings.
But steep valuations aren’t a deal breaker for Ellison, partly because he doesn’t see better alternatives in the financial sector. While he owns shares of large commercial banks, including Citi, JPMorgan Chase (JPM), and Bank of America (BAC), he calls them portfolio filler. The big banks have to worry about the credit cycle, Federal Reserve policy on interest rates, regulatory and Congressional oversight, and the yield curve, Ellison says. “If I own a PayPal or Square, I don’t have to worry about that.”
A major headwind for banks now is the Fed’s growing control over financial markets. The Fed’s balance sheet is nearly $7 trillion, up from $4.5 trillion in early 2015. And it now includes everything from mortgage-backed securities to repurchase agreements, corporate bonds, exchange-traded funds, and assets held through its Main Street Lending Program.
Banks are directly affected by the size of the Fed’s balance sheet, rate decisions, asset purchases, and other policy actions. With rates being held at record lows, bank lending margins are being compressed. Banks are also reluctant to lend to consumers and businesses, partly because the U.S. could be entering a downturn in the credit cycle, pressuring the value of mortgage loans and other assets on their books.
“The banks are all in the same bucket, making loans, taking deposits on the margins, there’s no difference with them, and there are so many of the stocks that it dilutes the real benefit of owning the stocks,” Ellison says.
Fintech stocks aren’t immune to these issues, but they are far less directly affected, acting as the conduits and rails of the system. The stocks benefit from scarcity value and the tailwind of e-commerce gaining traction in the pandemic economy. The risk is that valuations are unforgiving: They would fall hard and fast if growth slows.
That’s a bet Ellison is willing to take. “I’m not really concerned about Square’s valuation,” he says. “The payment processors are the runway to the future for equity performance. The equity value in balance-sheet companies like banks is just not there anymore.”
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Jack Henry & Associates - >>> 3 Top Stocks That Aren't On Wall Street's Radar
Some of the top stocks to own aren't the ones that make for splashy headlines.
Motley Fool
by James Brumley
Aug 18, 2020
https://www.fool.com/investing/2020/08/18/3-top-stocks-that-arent-on-wall-streets-radar/
How do you find stocks to buy? Is your approach a from-the-ground-up process rooted in results that narrows a wide list of names down until you're only left with the best of the best? Or do you gravitate toward the media's most-watched and most-discussed stock names and follow the crowd? The latter happens more often than you think.
With that as the backdrop, here's a closer look at Jack Henry & Associates (NASDAQ:JKHY), Generac Holdings (NYSE:GNRC), and Ciena (NYSE:CIEN) -- three prospective purchases that aren't on Wall Street's radar but that have the right stuff for potential investment all the same.
1. Businesses just can't quit Jack Henry
Jack Henry & Associates isn't just a name that's off Wall Street's radar. It's a name most investors may have never even heard of. The $15 billion software company helps retailers process payments, helps banks manage their financial details, and even has solutions for factories, insurers, and healthcare outfits. It's likely you've benefited from its wares without even realizing it.
It's an arena that includes higher-profile players like Visa, ServiceNow, and DocuSign, just to name a few. Software-as-a-Service (SaaS) has exploded in recent years, and the market is quick to fall in love with an organization that promises to revolutionize the idea with the product or service the world didn't know it was missing. That's not Jack Henry. It's been around for decades and has carved out a nice niche for itself by doing things that were fairly predictable.
That low profile, however, may ultimately be working to its advantage now. Its software may be such an integral part of its customers' daily routines that they can't afford to stop using it now. Jack Henry & Associates' revenue for the quarter ending in March was up 13% year over year, despite the COVID-19 headwind that was in place by the time the quarter ended. Sales and earnings growth is expected to slow for this full year, and next, but growth's in the cards all the same in an environment that's proving tough for plenty of companies.
2. Generac is powering up
A top tech name is one thing it isn't. But don't discount the potential of an old-school industrial name like Generac Holdings that solves an ever-expanding problem.
Generac makes a variety of goods, ranging from portable liquid pumps to pressure washers to mobile heaters. Its claim to fame, however, is electricity generators for the home and institutional markets.
The need for such solutions hasn't always been apparent. In recent years, though, the failings of the utility industry have prompted the search for self-sufficiency. For instance, the Camp Fire wildfires that ravaged more than 150,000 acres and destroyed nearly 19,000 structures in California in 2018 also caused power outages in undamaged areas. Some power customers in New York and New Jersey have also experienced the inconvenience of power outages related to this year's uncharacteristically hot temperatures that were exacerbated by damage done by Tropical Storm Isaias. Hurricanes hitting the United States are not only seemingly more frequent, but more powerful than they've been in the past, knocking out electrical service to greater numbers of customers, and for longer.
End result? The few analysts that cover Generac Holdings are collectively calling for a 7% improvement in this year's top line despite the impediment of the coronavirus contagion, and are modeling a reacceleration of top-line growth to a pace of nearly 11% next year. That growth will extend an unfettered growth streak that goes all the way back to 2013.
3. Ciena is a 5G centerpiece
Finally, add Ciena Corp. to your list of stocks to think about even though most folks on Wall Street aren't.
That's not to suggest Wall Street (or Main Street, for that matter) is entirely unaware of the $9 billion organization. About 20 analysts follow it and collectively rate it at a little bit better than a buy. That's just shy of deeming it a strong buy. The consensus price target of $61 is also a tad above the stock's present price of just under $60 per share. The pros hardly hate the stock.
They are arguably not paying enough attention to it, though, causing investors to do the same.
See, this networking and wireless-tech company is quietly responsible for helping to shape the 5G landscape as we know it. It's understood for some time that for 5G speeds to be possible in the number of deployments planned, conventional connectivity like fiber optics has to be part of the mix. That's why Ciena has been working on the solutions that fellow Fool Harsh Chauhan described last month, including 5G-optimized routers and 5G network automation software that serve as the backbone of a product line Ciena simply refers to as Adaptive IP.
Middlemen have already taken notice of Ciena's solutions. Earlier this month, Windstream announced it had tapped Ciena to supply the backbone of its planned National Converged Optical Network, or NCON. More such deals are apt to be in the cards too. Before the COVID-19 pandemic upended the world, 2020 was frequently touted as the year 5G would become the new normal in terms of wireless broadband speeds. We're now starting to see glimmers of a renewed effort to make that happen.
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>>> Jack Henry & Associates, Inc (JKHY). provides technology solutions and payment processing services primarily for financial services organizations in the United States. The company offers information and transaction processing solutions for banks ranging from community to multi-billion-dollar asset institutions under the Jack Henry Banking brand; core data processing solutions for various credit unions under the Symitar brand; and specialized financial performance, imaging and payments processing, information security and risk management, retail delivery, and online and mobile solutions to financial institutions and corporate entities under the ProfitStars brand. It also provides a suite of integrated applications required to process deposit, loan, and general ledger transactions, as well as to maintain centralized customer/member information; and complementary products and services that enable core bank and credit union clients to respond to evolving customer/member demands. The company's Jack Henry Banking business brand offers SilverLake, a robust primarily designed for commercial-focused banks; CIF 20/20, a parameter-driven, easy-to-use system for banks; and Core Director, a cost-efficient system with point-and-click operation. Its Symitar business brand provides Episys, a robust designed for credit unions; and CruiseNet, a cost-efficient system designed primarily for credit unions. In addition, the company offers electronic payment solutions; purchases and resells hardware systems, including servers, workstations, scanners, and other devices; and provides implementation, training, and support services. Jack Henry & Associates, Inc. was founded in 1976 and is headquartered in Monett, Missouri.
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>>> Repay Holdings Corporation (RPAY) provides integrated payment processing solutions to industry-oriented markets. Its payment processing solutions enable consumers and businesses to make payments using electronic payment methods. The company offers a range of solutions relating to electronic payment methods, including credit and debit processing, automated clearing house processing, and instant funding. It provides payment processing solutions to customers primarily operating in the personal loans, automotive loans, receivables management, and business-to-business verticals. The company sells its products through direct sales representatives and software integration partners. Repay Holdings Corporation was founded in 2006 and is headquartered in Atlanta, Georgia. <<<
Visa, Amazon - >>> 2 Robinhood Stocks to Buy and Hold Forever
These companies from the site's top 100 have strong moats and long-term growth prospects.
by Will Ebiefung
Aug 25, 2020
https://www.fool.com/investing/2020/08/25/2-robinhood-stocks-to-buy-and-hold-forever/
Long-term investing is the key to success in the stock market. It's a hard lesson for many new investors to learn -- especially on Robinhood, where low-quality penny stocks can often steal the limelight. Fortunately, Robinhood investors are also high on some stocks that are set up for sustainable success because of their large competitive moats and long-term growth drivers.
The first I'm highlighting today is Visa (NYSE:V), the global payments processor that is a rock-solid bet in this increasingly consumption-driven economy. The second is Amazon (NASDAQ:AMZN), the e-commerce giant that's pivoting toward cloud computing and healthcare. Both companies are listed in Robinhood's top 100 with analyst buy ratings above 80%.
Visa
In retail electronic payments, Visa enjoys undisputed market leadership in the United States through its ubiquitous branded debit and credit cards. With household consumption making up 68% of the country's GDP, Visa stock is an investment in the long-term strength of the American economy. But the investment thesis here doesn't stop with America. The company's international expansion and the increasing prevalence of e-commerce will also be significant growth drivers.
Visa's latest earnings release, which covers the quarter ending June 30, reflects the full impact of the coronavirus pandemic, which dramatically reduced consumer spending due to lockdowns and travel restrictions in the U.S. and internationally. Net revenue fell 17% on lower transaction volume, and earnings fell 22% to $1.07 per share.
But Visa is poised to bounce back. Consumer spending is rebounding as countries relax their restrictions. And online shopping, a major driver of credit and debit card use, remains elevated. Management also has a wide array of projects to expand Visa's footprint outside North America and Europe.
Recently, Visa started working with Facebook to introduce a new payment feature on WhatsApp in Brazil that will let users purchase items or send money to family and friends through the popular messaging app. The company has also renewed its partnership with OCBC Bank, Singapore's second-largest debit issuer.
Amazon
Amazon has evolved from an online bookseller into a massive e-commerce platform. The company's market dominance and compelling pivot to cloud computing and healthcare make it another popular Robinhood stock that will stand the test of time. And unlike Visa, Amazon's latest quarterly results showed phenomenal performance.
Net sales jumped 40% to $88.91 billion while operating income soared 89% to $5.84 billion due to increased stay-at-home shopping during the pandemic. Amazon's cloud computing service, Amazon Web Services, made up $3.36 billion (58%) of the company's operating income and is poised for continued growth due to the megatrend of business computing moving from traditional data centers to the public cloud.
Amazon is also making an aggressive push into healthcare, an arguably limitless industry where it may have a competitive edge because of its extensive logistics infrastructure and investments into artificial intelligence.
In August, Amazon's India division launched a pilot pharmacy delivery program in the city of Bengaluru (also known as Bangalore) amid the pandemic. Amazon is also making significant healthcare investments in the United States through the $753 million acquisition of drug distributor PillPack in 2018. And it's reportedly working on a vaccine for the common cold, an illness that costs the U.S. economy at least $40 billion a year.
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Bill.com Holdings (BILL) - >>> 19 of the Best Stocks You've Never Heard Of
Kiplinger
by Jeff Reeves
6-23-20
https://www.kiplinger.com/slideshow/investing/t052-s001-19-of-the-best-stocks-youve-never-heard-of/index.html
Bill.com Holdings
Sector: Information technology
Market value: $6.1 billion
Dividend yield: N/A
Silicon Valley firm Bill.com Holdings (BILL, $81.86) does exactly what the name implies: It offers payments processing services such as ACH transfers, virtual credit cards and digital checks for small businesses.
It's a much-needed service that is particularly important in 2020 as companies have to figure out how to do business digitally. And Bill.com is sure to stick with many of its newer clients who are proving out the value of this web-based payments portal over their old accounting methods.
At least, that's what Wall Street seems to think.
Increased adoption rates and better monetization across the start of the year has analysts quite pleased; Piper Sandler, Needham, KeyCorp, BofA and Jefferies all labeled the stock a Buy or boosted their price targets in May, suggesting it's one of the best stocks to buy among mid-caps.
Those positive forecasts came on the heels of a stellar earnings report that included 46% revenue growth as subscripts and transactions surged 63% over the prior year. In other words, the recent optimism is backed by impressive numbers.
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>>> Bill.com Holdings, Inc. (BILL) provides cloud-based software that digitizes and automates back-office financial operations for small and midsize businesses worldwide. It offers artificial-intelligence (AI)-enabled financial software platform. The company provides software-as-a-service, cloud-based payments products, which allow users to automate accounts payable and accounts receivable transactions, as well as enable users to connect with their suppliers and/or customers to do business, manage cash flows, and enhance office efficiency. It also offers onboarding implementation support, as well as ongoing support and training services. The company serves customers operating in the accounting and accounting software companies, and financial institutions. Bill.com Holdings, Inc. was founded in 2006 and is headquartered in Palo Alto, California.
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>>> American Express JV gets final approval to launch operations in China
Reuters
6-13-20
https://www.reuters.com/article/us-china-finance-pboc-idUSKBN23K07K
SHANGHAI (Reuters) - China’s central bank has given the final nod to a network clearing license for an American Express (AXP.N) joint venture, allowing it to be the first foreign credit card company to launch onshore operations in China.
The approval comes against a backdrop of high Sino-U.S. tensions, with disagreements over trade and Beijing’s imposition of a national security law for Hong Kong.
The People’s Bank of China (PBOC) said in a statement Saturday that it had approved the license for Express (Hangzhou) Technology Services Co., a joint venture between American Express and LianLian DigiTech Co Ltd. It said the move reflected China’s continued opening up of its financial industry.
The PBOC said in January that it had received American Express’s application to start operations in China.
In a statement, American Express said it expects to begin processing transactions later this year.
“This approval represents an important step forward in our long-term growth strategy and is an historic moment, not only for American Express but for the continued growth and development of the payments industry in mainland China,” Stephen J. Squeri, chairman and chief executive officer of American Express, said.
The PBOC has also approved an application by Mastercard’s (MA.N) China joint venture to conduct bank card clearing operations in the country, but the company has not yet received a network clearing license.
Card giant Visa (V.N) submitted its application in early 2018 and is still awaiting approval.
China is opening its local currency payments market to foreign companies after a decade of lobbying by foreign players seeking direct access to what is expected to soon become the world’s biggest bank card market.
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>>> 4 ETFs For Investing In FinTech And The Payments Industry
Nasdaq.com
by Prableen Bajpai
JUL 8, 2019
https://www.nasdaq.com/articles/4-etfs-for-investing-in-fintech-and-the-payments-industry-2019-07-08
Technological advancements are disrupting various industries, challenging traditional players to make timely adaptions in order to remain relevant. The payments industry is no exception. The innovations based artificial intelligence, cloud and biometrics coupled with demand for fast and secure cashless transactions, use of smart devices, internet penetration, increasing adoption of e-commerce and changing consumer demographics is bringing in a wave of digital transformation.
Here’s an overview of the payments industry and a look at the exchange traded funds (ETFs) providing an investment opportunity in this space.
Global revenue from payments surpassed $2 trillion in 2018 and is set to approach $3 trillion within the next five years. While cash continues to be king, the potential for digital payments is immense. The Digital Money Index of 84 countries that track the development of digital money readiness shows an improvement of 5.5% over the last five years.
China continues to lead the movement away from cash with the share of electronification increasing by more than ten-fold over the last five years, according to a McKinsey report. In terms of regions, North America is the first region to execute more than half of its transactions electronically. India is pushing its initiative dubbed as ‘Digital India’ which highlights “faceless, paperless, cashless” as one its professed roles.
Several studies recommend the potential benefits of digitized payments, ranging from time savings among consumers, increased sales revenues among businesses, reduced government administrative costs and higher tax collections. A research by Citi shows that “a 10% increase in digital money adoption by countries (constituting the index) would deliver a $150 billion lift in consumer spending, which raises business revenues, while digital payments also cut cash handling costs for services and businesses by $100 billion. Meanwhile, governments pocket $100 billion more in taxes and savings of $200 billion by digitizing disbursements. In total, up to $1 trillion of new flows would enter the formal economy.”
Here’s a look at some exchange traded funds which invest in companies that are a part of the transformation that’s underway.
The ETFMG Prime Mobile Payments ETF (IPAY) is a one of the oldest exchange traded funds providing exposure to stocks in the payments industry which is experiencing a shift from credit card and cash transactions to digital and electronic methods. The fund was launched in 2015 and has Prime Mobile Payments Index as its underlying benchmark index. In terms of geographies, the ETF has majority exposure to the U.S. with smaller exposure towards France, Netherlands, Germany and Japan. The ETF has a portfolio of around 40 stocks with the top ten holdings adding up to 48.62%.
The top ten holdings in its portfolio are:
Mastercard
Visa
American Express
PayPal Holdings
Fidelity National Information
Worldpay
FinServ
Square
First Data
Discover Financial Services
The ETF has $680.43 million as assets under management, 0.75% as expense ratio and has posted 35.14% year-to-date (YTD) returns.
Tortoise Digital Payments Infrastructure Fund (TPAY) is one of the recent ETFs, launched in 2019 providing access to the payments space. The ETF tracks the Tortoise Global Digital Payments Infrastructure Index represents 53 companies which are a prominent part of the global digital payments landscape. The ETF has $4.58 million as assets under management and an expense ratio of 0.40%. In the last three-months, it has given 8.93% returns.
The top holdings have a 45.62% allocation and comprise of companies such as:
Fleetcor Technologies
Square
First Data
FinServ
Worldpay
Fidelity National Information
American Express
MasterCard
Total System Services
Wirecard
Next is the Global X FinTech ETF (FINX). Launched in 2016, the ETF seeks to invest in companies that are on the leading edge of the emerging financial technology sector and are looking at industries such as insurance, investing, fundraising, and third-party lending through unique mobile and digital solutions. The ETF tracks the Indxx Global Fintech Thematic Index. The country-wise break-up reflects 70% exposure to the U.S., followed by countries such as Switzerland, Germany, Australia, New Zealand, Demark and Brazil.
With $415.58 million as assets under management and an expense ratio of 0.68% as expense, the fund has delivered 33.82% YTD returns. The ETF has close to 40 stocks in its portfolio with top ten holdings that combine to almost 55% of the portfolio.
First Data
FinServ
Fidelity National Information
Wirecard
Intuit
Square
PayPal Holdings
Adyen
Guidewire Software
Black Knight
ARK Fintech Innovation (ARKF) is another ETF has been launched in 2019. ARKF is an actively managed ETF with a focus on companies engaged in the theme of fintech innovation. The ETF holds a portfolio between 35-55 stocks with a large-cap bias. The ETF has posted 4.93% YTD returns. It has $72.09 million as assets under management and an expense ratio of 0.75%.
The top ten holdings of the ETF are:
Square
Tencent
Apple
Zillow
com
Alibaba
PayPal
Rakuten
LendingTree
Line
Final Word
Global investment in financial technology ventures more than doubled in 2018, to $53.3 billion. A major part of it came for a single record funding round worth $14 billion in Ant Financial, best known for its mobile payments service Alipay.
Juniper Research projects that the number of people using digital wallets touch nearly 50% of the world’s population by 2024, pushing wallet transaction values up by more than 80%. Overall, the global digital payments market is expected to reach $7.64 trillion by 2024, recording a CAGR of 13.7% (2019-2024).
With the advancement in payments industry and colossal scope for growth, these ETFs are a favorable way to be a part of the digital journey, which has begun across the globe.
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Visa, Mastercard - >>> 3 Stocks the World's Best Investors Just Bought
Want to invest like Buffett or Einhorn? Check out what they're buying.
Motley Fool
John Bromels
May 22, 2020
https://www.fool.com/investing/2020/05/22/3-stocks-the-worlds-best-investors-just-bought.aspx
If you want to invest like a pro, there's no better way to learn than by watching the pros. On May 15, some of the world's best investors -- including the "Oracle of Omaha," Warren Buffett himself -- had to file their quarterly 13F forms with the Securities and Exchange Commission.
The 13F form is a quarterly statement of stock holdings that's required of all institutional investment managers with assets of $100 million or more. It offers a window into what top investors have been buying, selling, and leaving alone. And sometimes, these filings contain quite a few surprises.
Here are three stocks that top investors have recently been buying, and some reasons why you might want to do the same.
Banking on banks
It's worth noting that 13F forms have some shortcomings as investment tools. First of all, because they're filed 45 days after the end of a quarter, the trades they contain are at least a month and a half old, and they could be as much as four and a half months old by the time you ever see the data. Another problem: Companies are only required to report their long positions, but may actually be hedging some of those buys with short positions that aren't reported.
That said, it's clear from the 13Fs that there was a lot of focus on the banking industry during the first quarter. That's not surprising, considering that the Federal Reserve cut its benchmark federal funds interest rate to zero, which caused banking stocks to tumble. David Einhorn's Greenlight Capital picked up shares of Goldman Sachs, while Leon Cooperman's Omega Advisors bought JP Morgan Chase, possibly on the cheap after the rate cut.
Buffett, on the other hand, unloaded shares of both. In fact, during Q1, his Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) did a lot more selling than buying. Its biggest buy, though, was also a bank: PNC Financial Services Group (NYSE:PNC). Buffett bought more than 500,000 shares, bringing his total position in the bank to about 9.2 million shares.
What does Buffett like about PNC? Well, he may believe that recently reduced capital and liquidity requirements for big regional banks like PNC will give it a leg up on its Big Bank peers. The opportunistic PNC also has a history of making big acquisitions during downturns, like its 2008 purchase of National City. Rumors are already swirling that PNC is planning something big, and it's possible Buffett wanted to boost his position before it happens.
Buffett's not buying: Better buy Buffett
If Buffett isn't buying right now, what are other big investors doing with their money? Buying Buffett, of course! Or rather, buying shares of Berkshire Hathaway.
Many big funds already hold shares of Berkshire, but several prominent investors picked up additional shares during the first quarter, including Einhorn and Bill Ackman of Pershing Square Capital. And why wouldn't they? Berkshire Hathaway is a reliable business with an excellent track record of success.
Berkshire's core insurance businesses -- which include GEICO and MedPro Group -- churn out gobs of reliable cash, which Buffett and his lieutenants can then invest in stocks of other companies ... or in just buying companies outright. Berkshire directly owns numerous stalwart businesses including Duracell, Dairy Queen, and Fruit of the Loom. It also owns big stakes in other big, reliable companies like Coca-Cola and Apple.
In uncertain economic times, Berkshire looks like a safe place to park your money.
Plastic without the plastic
Even though Buffett didn't pick up any shares of payment processor Visa (NYSE:V) last quarter, Berkshire already owns more than 10.5 million shares of the company. Add to that the company's 4.9 million shares of Mastercard and the nearly 13 million shares it owns of American Express, and it's safe to say that Buffett is a fan of payment processing companies.
Other top investors, though, grabbed plenty of Visa stock recently, including Kenneth Griffin's Citadel Advisors, which added more than 1.5 million shares to its stake, and Stephen Mandel's Lone Pine Capital, which opened a new position of 3.3 million shares.
With hundreds of millions of Americans largely staying at home due to the coronavirus, e-commerce sales have exploded, even in categories like groceries and prescription drugs, which up until now had primarily been purchased through face-to-face transactions. Since you can't use cash or written checks for e-commerce, payment processors like Visa have seen their e-commerce transactions skyrocket, even as traditional "card-present transactions" have declined.
"We're seeing a massive acceleration toward e-commerce adoption," said Visa Chief Product Officer Jack Forestell in a recent interview with MarketWatch. If consumers who have been forced to try e-commerce or use it in ways they haven't previously done decide they like its convenience, they may keep shopping that way after social-distancing mandates are eased and businesses reopen, which would benefit payment processors like Visa.
Although Visa's business is likely to suffer in the short term, it looks like a long-term buy.
Be your own Buffett
Blindly buying the same stocks as master investors like Buffett, Einhorn, and Ackman isn't necessarily going to make you a top investor -- especially given the time lag between when they act and when you can see what they've bought. But studying their picks can help you figure out what industries might be promising places to put your money and which stocks to keep on your watch list.
Right now, regional banks like PNC, stalwarts like Berkshire Hathaway, and payment processors like Visa all look like smart bets for your portfolio too.
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>>> Play These ETFs on Visa-Plaid Deal
Zacks
by Sanghamitra Saha
January 14, 2020
https://finance.yahoo.com/news/play-etfs-visa-plaid-deal-193007795.html
Visa Inc. V is set to take over U.S.-based fintech company Plaid in a deal worth $5.3 billion — almost double the start-up’s last private valuation. Plaid raised $250 million in a 2018 Series C funding round that set its valuation at $2.7 billion. The Visa-Plaid deal is expected to be finalized in the next three to six months, pending regulatory approval.
“Plaid’s API software lets start-ups connect to users’ bank accounts.” Plaid has been working with Venmo, a mobile payment service owned by PayPal PYPL, mobile investing app Robinhood and cryptocurrency exchanges Coinbase and Gemini, per CNBC.
Plaid’s customer base doubled from 2017 to 2018 and has expanded to the U.K. and Canada, per CNBC. As of December 2019, Plaid said 25% people in the United States with bank accounts have connected to the fintech company through an app.
The start-up acquired Quovo two years ago to expand its presence beyond banking, and step into broader financial services and investments. The line of business makes it clear why Visa, which operates retail electronic payments networkglobally,chose Plaid as a compelling acquisition candidate.
Visa CEO said Plaid has been seeing a CAGR of about 100% since 2015. The deal would prepare Visa for the technological disruption in the next decade. Visa also expects the deal to inject as much as 100 basis points to net revenues by 2021.
Visa’s shares 0.81% on Jan 13 and also added gains after hours. However, Visa has a Zacks Rank #3 (Hold) and an ESP of -1.08%. The negative ESP lowers chances of a beat in the to-be-reported earnings, slated to be released on Jan 29.
Investors, who want to bet on the Visa-Plaid deal but are having second thoughts due to negative ESP, may play the below-mentioned Visa-heavy ETFs. A basket approach always minimizes stock-specific risks.
iShares U.S. Financial Services ETF (IYG)
Visa takes the second spot in the fund with about 9.79%. The fund has a Zacks Rank #3 (read: Should You Bet on Bank ETFs Before Earnings Release?).
ETFMG Prime Mobile Payments ETF (IPAY)
Visa takes the fourth position in the fund with about 6.05% exposure (read: ETFs to Invest in Mobile Payments and Drone Economy).
iShares U.S. Financials ETF (IYF)
The Zacks Rank #3 fund invests about 5.64% in the stock, taking the third position.
SPDR SSGA Gender Diversity Index ETF (SHE)
Visa takes the top spot in the fund with about 5.28% focus.
Technology Select Sector SPDR Fund (XLK)
The Zacks Rank #1 (Strong Buy) fund puts 5.19% in Visa (read: Apple at All-Time High, Poised for an Upbeat Q1: ETFs to Benefit).
Invesco S&P 500 Quality ETF (SPHQ)
The fund invests about 5.14% in the stock (read: Should You Invest in Factor & Smart Beta ETFs?).
iShares Edge MSCI USA Momentum Factor ETF (MTUM)
Visa takes the second spot in the fund, with about 5.14% exposure (read: Bet on These Momentum ETFs to Gain From Wall Street's Rally).
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>>> Don’t Leave Fintech ETFs Out of the Best New 2019 ETFs
ETF Trends
December 20, 2019
https://finance.yahoo.com/news/don-t-leave-fintech-etfs-170905787.html
The conversation about what makes new ETFs successful almost always leads to dollars, meaning assets under management, but that topic should be discussed in relative terms. For instance, some rookie ETFs addressing refined market segments or disruptive niches can take a while to catch investors' eyes.
On that basis, the ARK Fintech Innovation ETF (ARKF) , which debuted in February, is off to a stellar start. The first actively managed ETF in the fintech space, ARKF already has $72 million in assets under management.
ARKF invests in equity securities of companies that ARK believes are shifting financial services and economic transactions to technology infrastructure platforms, ultimately revolutionizing financial services by creating simplicity and accessibility while driving down costs.
ARKF can hold between 35 and 55 stocks and as of Dec. 19, the fund was home to 43 names, led by Square (SQ) and Apple (AAPL) with that duo combing for over 15% of the fund's weight. Integral to the ARKF thesis is the fact that ARK sets credible standards for defines a fintech investment.
“A company is deemed to be engaged in the theme of Fintech innovation if (i) it derives a significant portion of its revenue or market value from the theme of Fintech innovation, or (ii) it has stated its primary business to be in products and services focused on the theme of Fintech innovation,” according to the issuer.
Primed For Growth In 2020
ARK is higher by nearly 11% in the current quarter, indicating it could be ready for more upside in 2020. Fortunately, that thesis is bolstered by credible fundamental factors.
“The global fintech market was valued at about $127.66 billion in 2018 and is expected to grow to $309.98 billion at an annual growth rate of 24.8% through 2022,” according to a recent Business Research report.
ARKF's active management style has been a boon as the fund has averted lagging fintech lenders, such as Elevate Credit (ELVT), Enova (ENVA), FlexShopper (FPAY), LendingClub (LC), and OnDeck Capital (ONDK) , Each of those names was spotted trading below their initial public offering prices earlier this month.
Likewise, if ARK's team sees opportunities in those names or areas of the fintech market, it can exploit those odds more effectively than index-based rivals because ARKF isn't constrained by a benchmark.
In terms of fintech niches on more solid ground, the booming mobile payments could again be a catalyst for ARKF in 2020.
Payments are increasingly going digital with a number of start-ups seeing venture capital seed money to help facilitate online purchases. According to the research company Pitchbook, data shows that investors put $18.5 billion into the payment processing sector in 2018--an increase of five times the previous year.
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Mastercard - >>> 3 Stocks to Hold for the Next 20 Years
Investors need to look for companies with a track record of stability and resilience as key attributes.
Motley Fool
Royston Yang
May 21, 2020
Ideally, as an investor you should consider holding stocks over years, even decades. The magic of compounding will provide you with a substantial nest egg to enjoy your golden years, while a growing income stream from dividends provides a hedge against inflation. However, it's important not to buy and own the wrong companies. Doing so will result in poor or even negative returns and may destroy your capital over time.
So, what attributes do great companies have? They should have a strong competitive advantage, market share, and a high level of resilience. These attributes will allow them to weather crises over the years and yet emerge unscathed or even stronger. Companies with such attributes are usually large, with a long track record of growth and stellar financial performance. Size confers an advantage as it allows them to dominate the industry they are in and continue to lead the pack.
Here are three examples of stocks that you can hold for the next two decades.
Mastercard
Mastercard (NYSE:MA) is a market leader in the financial services and payments industry. The company acts as an intermediary between banks and end customers by providing a secure platform for transaction and payments processing. For the first quarter of the fiscal year 2020, the company processed a gross dollar volume of $1.56 trillion worth of transactions, up 8% year over year. The number of cards in circulation grew 5% year over year to 2.6 billion.
Mastercard is a market leader in cashless transactions. With more countries modernizing and shifting to paperless transactions, the future looks bright for the company despite the short-term effect of the COVID-19 pandemic. Because of the pandemic, the company has temporarily suspended its share repurchase program. Dividend per share has been maintained at $0.40 per quarter as the business continued to generate strong operating cash flow of $1.9 billion. With strong tailwinds for its business and a robust balance sheet, Mastercard is a company you can own for the long term without losing sleep.
Nike
Nike (NYSE:NKE) is a market leader in the design and manufacture of sports footwear and apparel. The company has retail stores located around the globe and reported growth in revenue and net income of 7% and 10% respectively for the first nine months of the fiscal year 2020.
Though Nike has had to temporarily close stores in China, North America, and other parts of the world due to COVID-19-related lockdowns, the company has managed to tap on its digital sales platform to sell its products. Digital sales were up 36% year over year during the quarter , and CEO John Donahoe has reiterated the company's commitment to invest in the Nike Direct online platform and the Nike app. Digital is the company's fastest-growing channel, and owned and partnered digital sales represent more than 20% of overall revenues.
Nike is also famous for its innovation in running shoes. A few months ago, the new Nike ZoomX Vaporfly NEXT% was touted as one of the best running shoes ever made, with people going so far as to claim it gives athletes an unfair mechanical advantage. The company has just devised a new self-lacing shoe called HyperAdapt 1.0 that electronically adjusts to the contours of your foot and offers style in addition to comfort.
Investors can rest assured that the company's innovative culture and loyal fan base make the company an attractive one to own for the long term.
American Tower
American Tower (NYSE:AMT) is an owner and operator of a portfolio of roughly 180,000 communication sites that are leased to wireless service providers and communication companies. The company is incorporated as a real estate investment trust and is mandated to pay out 90% of its annual taxable income as dividends.
Over the years, American Tower's dividend has grown impressively by around 22.8% per annum over the last seven years, from $0.90 per share in 2012 to $3.78 in 2019. The company has achieved this through acquisitions of cell towers in emerging markets and by increasing the number of tenants using the same tower (thereby improving the return on investment for each tower).
With the expected investment by telecommunication companies in the development of 5G network technology, American Tower can expect an extended period of solid growth. This catalyst can allow the company to grow for many more years, and investors can look forward to continually growing dividends.
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>>> Some Globetrotting Helps This Fintech ETF
ETF Trends
February 18, 2020
https://finance.yahoo.com/news/globetrotting-helps-fintech-etf-171057934.html
The fintech theme is soaring to start 2020 and one of its standouts is the ARK Fintech Innovation ETF (ARKF) , which is higher by nearly 13% year-to-date after vaulting to another record high last Friday.
ARKF invests in equity securities of companies that ARK believes are shifting financial services and economic transactions to technology infrastructure platforms, ultimately revolutionizing financial services by creating simplicity and accessibility while driving down costs .
One potent ingredient with ARKF is that its active management style doesn't confine the ETF to the domestic fintech space. Rather, the fund features ample international exposure, which is important considering the broad adoption and reach of fintech outside the U.S.
Argentina's Mercadolibre (MELI) and Brazil's StoneCo (STNE) , the former of which is a major ARKF component, are among the attractive ex-US fintech names.
Fintech companies looking to carry over their wave of disruption, especially in the online payments space can look to Latin America for potential opportunities. This, in turn, could create interest in fintech-focused ETFs looking to add to their core portfolios of financial disruption companies by looking outside of developed markets.
In Latin America, online payments is still a relatively new concept as opposed to more developed economies where they have become standard fare.
“MELI and STNE are lesser known companies with similar businesses and similar charts. MELI is mostly known as an e-commerce firm — something of a cross between Google and Amazon.com. But the Argentine company is also becoming a financial-service provider by providing loans and financing to millions of small businesses in Latin America,” according to TradeStation.
American Names Help, Too
The payment processing space is seeing a growing number of big bets placed by venture capitalists, which could give financial technology ETFs a boost. It’s a $1.9 trillion industry that the largest tech firms are trying to tap into
“Stocks like Square (SQ) and PayPal (PYPL) not only stand at the crossroads of the new digital economy. They’ve also outperformed the S&P 500 and Nasdaq-100 by a wide margin so far in 2020,” according to TradeStation. “Two Latin American firms, MercadoLibre (MELI) and StoneCo (STNE) make the list as well. That kind of strong price action is a classic sign of investor rotation, a process of large institutions shifting capital into certain industries. The fact it’s happening early in the year is another sign of accumulation by new buyers.”
Square, Mercadolibre and PayPal combine for nearly 20% of ARKF's weight.
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>>> An ETF for Fintech Innovation
MoneyShow
March 10, 2020
https://finance.yahoo.com/news/etf-fintech-innovation-100000061.html
Financial technology, or fintech, is a relatively new and growing part of the market, explains Jim Woods, exchange-traded fund expert and editor of The Deep Woods.
It features interesting companies that transform the way in which we engage in transactions, as well as how financial processes are handled on a business-to-business level. One way to gain exposure to this theme is through the actively managed exchange-traded fund ARK Fintech Innovation ETF (ARKF).
This fund seeks to be on the cutting edge of new technology in this space. According to ARK Invest, fintech innovation companies include those involved in transaction innovations, blockchain technology, risk transformation, frictionless funding platforms, customer-facing platforms and new intermediaries, among other areas.
All these themes, of course, have the potential to create hugely profitable ventures. While the blockchain craze has largely died down, there still are companies that are legitimately engaged with the technology as a source of profit.
Financial technology may be a more interesting theme than companies that have, as was popular a few years ago, simply appended “blockchain” to their names to attract investors.
The largest position in this fund by far is Square (SQ), the maker of small card readers for small businesses. The company’s technology has become ubiquitous over the past few years, and shareholders have profited handsomely.
This fund is up by about 20% over the last year. It currently trades at a small premium to net asset value (NAV), as usual, and has an expense ratio of 0.75%.
With assets under management of just $83 million, this fund falls below my recommended threshold for investment, but its strategy is an interesting one that merits bringing to your attention. ARKF has powered upward since October, leaving its moving averages in the dust.
Top holdings for this fund include Square, Tencent Holdings (TCHEHY), Apple (AAPL), MercadoLibre (MELI), 4.48% and PayPal Holdings (PYPL).
New investment themes for investors to consider are always interesting. If you believe that the frontier of fintech is a promising source of further upside, ARK Fintech Innovation ETF (ARKF) may be a fund worth considering for possible investment.
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>>> How To Cash In On Money's Coming Makeover
Investors Business Daily
MATT KRANTZ
12/19/2019
https://www.investors.com/etfs-and-funds/sectors/fintech-stocks-invest-in-money-cash-technology/?src=A00220&yptr=yahoo
Money is about to get a face-lift. And investors are looking to which fintech stocks will cash in.
Everything about money — from the way it's spent, stored and invested — is up for new forms of digitization. Investors see a massive opportunity.
Nearly $25 billion in venture capital funding poured into financial technology firms this year through the third quarter, says industry tracker CBInsights. The latest deluge of funding comes just one year following a record-breaking $40.6 billion put into the industry in 2018. And this year's haul is more than the $18.8 billion invested in all of 2017.
These are private companies. But leading public fintech stocks are up big too this year. Which fintech stocks let investors play the future of money now?
There are three primary ETFs to help you buy into the public companies leading the fintech charge -
ETFMG Prime Mobile Payments ETF (IPAY) is the largest with assets of $782.8 million.
The ETF owns 40 publicly traded companies at the epicenter of payment services and processing. The ETF's largest holding, at 7.5%, is Global Payments (GPN). The company processes digital, credit card and check payments. It operates not only in North America, but also Europe and Asia.
Shares of Global Payments are up 75% this year as investors applaud its robust growth. The company's revenue jumped more than 29% in the third quarter to $1.1 billion. Analysts are looking for the company's revenue to grow 62% in 2020 and earnings per share to rise 22% to $7.55.
Such strong fundamentals and chart action explain why Global Payments carries a sky-high 97 IBD Composite Rating.
What makes ETFMG Prime Mobile somewhat unique is its large stakes in credit card processors, says Todd Rosenbluth, director of ETF and mutual fund research at CFRA. The ETF, for instance, puts a more than 18% combined weighting in Visa (V), Mastercard (MA) and American Express (AXP).
The credit card companies have performed strongly this year and are turning into important plays to get into fintech stocks. Visa, the largest company of the three, has seen shares jump 41% this year. The credit card stocks are among the top performers in the S&P 500 this year.
ETFMG Prime Mobile Payments charges 0.75% annually. It's up 41.6% this year through Dec. 17, 2019.
A Narrower Fintech Stock ETF
Another major player in the fintech ETF space is -
Global X FinTech ETF (FINX). The ETF, with assets of $414 million, owns 34 stocks.
The Global X FinTech ETF's largest holding, at 14%, is Fiserv (FISV). Shares of the payment processing provider are up nearly 60% this year.
There are strong fundamentals to back up Fiserv's stock price gains, too. The company's profit this year is on track to rise nearly 30% to $4.02 a share. And in 2020? Analysts are calling for an annual profit of $4.91 a share, up 22% from 2019.
The Global X FinTech ETF charges 0.68% annually. And it's up 35.8% this year through Dec. 17.
Another Approach
ARK Fintech Innovation ETF (ARKF) is a new entrant in the industry. It traces its inception to Feb. 4, 2019. It brings an active selection process to find ways to buy into new products or services "that potentially (change) the way the financial sector works."
The fund is still small, with assets of roughly $82 million. But it's looking to differentiate itself from the larger options. The ETF's top holding is payment services provider Square (SQ) at 9.5% of the portfolio. But the ETF adds shares of companies working different angles than other fintech stocks.
For instance, the ETF's second-largest holding after Square is Apple (AAPL) at 6.1%, followed by China's Tencent (TCEHY).
And that's why Rosenbluth, when looking at the fintech ETFs, warns: "Despite similar sounding names what's inside these thematic funds and their performance records in 2019 are quite different."
Dave Nadig, managing director of ETF.com, has a larger warning. He points out these ETFs are limited to publicly traded firms. That's a big drawback in fintech, he says. "The vast majority of interesting fintech companies are still private, so this is probably money chasing already richly valued, public companies," he said.
Three Ways To Play Fintech Stocks
ETF Symbol YTD % Ch. Assets ($ millions) Expense Ratio
ETFMG Prime Mobile Payments ETF IPAY 41.6% 782.8 0.75%
Global X FinTech ETF FINX 35.8% 414.4 0.68%
ARK Fintech Innovation ETF ARKF 18.4% 81.7 0.75%
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>>> Eight Stocks Give Warren Buffett A Headache (They're Not Airlines)
Investor's Business Daily
MATT KRANTZ
05/14/2020
https://www.investors.com/etfs-and-funds/sectors/sp500-stocks-give-warren-buffett-big-headache-they-are-not-airlines/?src=A00220&yptr=yahoo
Warren Buffett finally bailed out on S&P 500 airline stocks. But his portfolio is still full of stocks giving him giant headaches.
Berkshire Hathaway (BRKB) this year lost $1 billion or more, and at least 20%, on eight of its 47 U.S.-listed public holdings like financials Bank of America (BAC) and Wells Fargo (WFC) plus consumer staples stock Coca-Cola (KO). This is according to an Investor's Business Daily review of Buffett's latest holdings data from S&P Global Market Intelligence and MarketSmith. Only stocks primarily listed on U.S. exchanges were included.
Big losses in the famed Buffett portfolio persist even after he unloaded massive airline losers. And it's showing the dangers of chasing after value-priced stocks — the ones Buffett tends to prefer — in this coronavirus market. Learn how to find breakaway growth-stock winners instead on Leaderboard.
Shares of Berkshire Hathaway are down 22% just this year alone, dragged down by a host of lagging stocks. The S&P 500 is only down 13% and the growth-focused Nasdaq 100 is up 2.6%. Buffett alone lost $21.8 billion this year on his 16% stake in the company. No other top individual owner has lost anywhere near that much on an S&P 500 stock this year.
No wonder Berkshire just posted the largest-ever loss by an S&P 500 company.
Warren Buffett Snared By S&P 500 'Value Trap'
Much of Buffett's pain centers around his tilt toward S&P 500 value stocks. It's ironic as "cheap" stocks are supposed to offer safety in downturns with dividends and stability. But that's not happening in the coronavirus stock market.
The Vanguard Value ETF (VTV) is down a crushing 22% this year, nearly identical with Berkshire Hathaway's drop. But growth stocks are faring much better as they are showing more resilience in the coronavirus-inflicted world. The Vanguard Growth ETF (VTV) is down just 1.2% this year.
What's hurting the value stocks group? Exactly the kinds of stocks investors want nothing to do with in a pandemic.
S&P 500 Financials: Still A Pain Point
A trio of financials are now handing Berkshire Hathaway its biggest losses.
Berkshire Hathaway is down $13.6 billion just on one stock this year: Bank Of America. The bank's brutal 41% drop this year hurts as Berkshire Hathaway owns nearly 11% of the company. Wells Fargo is down even more: 58%. That's wiped nearly $11 billion from Berkshire's portfolio. And then there's American Express (AXP), off 37%, costing the portfolio nearly $7 billion.
Now that Buffett sold his airline stocks, the financials are Buffett's biggest problem. Six of Berkshire's worst eight losses are all financials. Savvy investors can actually make money betting against banks Buffett owns, like Wells Fargo.
Berkshire Hathaway holds 17 publicly traded financials. That's more than any other sector in the portfolio, says S&P Global Market Intelligence. And Berkshire Hathaway's public holdings in financial stocks account for a third of his portfolio. In contrast, the financials sector accounts for just 13% of the S&P 500 and just 19.5% of S&P 500 value indexes.
Being heavy on S&P 500 financials is a big drag for Buffett and other value investors. The Financial Select Sector SPDR ETF (XLF) is down 33% this year. That's the second-worst loss of the 11 sectors after only the energy sector's 40% wipeout. And that's saying something.
Not Even Coke Is Giving Buffett A Smile
Consumer staples are supposed to shine in recessions. Packaged foods gain popularity when money's tight. One 69-year-old actually scored more than $100 million on Campbell Soup stock this year. The Consumer Staples Select Sector SPDR ETF (XLP) is down this year 9.4%, holding up better than the S&P 500.
But no such luck with Buffett's favorite consumer staples stock: Coca-Cola. The beverage maker is down twice that of the sector, 21%, this year. Buffett owns 9% of the company so the drop bubbles into a $4.6 billion loss this year.
And unlike other consumer staples companies seeing bumps in their business, Coke's earnings are predicted to fall 11% this year, says S&P Global Market Intelligence. No wonder it sports a low 66 IBD Composite Rating. Compare that with the 99 Composite Rating of rival beverage maker, Monster Beverage (MNST), which is a growth stock. Monster shares are up 2.5% this year.
Certainly, value stocks might return to favor — one day. Large value stocks returned an average 10.37% annually since 1928, says Index Fund Advisors. That edges slightly past the 9.77% annualized gain of the S&P 500.
But do you and Buffett want to bet on them returning anytime soon?
Warren Buffett's Costliest Mistakes This Year
Most big losses are from S&P 500 financials
Company Ticker % Of Company Owned By Berkshire Sector YTD Stock % Ch. Berkshire's YTD Loss ($ Billion) Composite Rating
Bank of America (BAC) 10.9% Financials -40.7% $13.6 42
Wells Fargo (WFC) 8.4% Financials -58.1% $10.8 6
American Express (AXP) 18.8% Financials -37.3% $7.0 62
Coca-Cola (KO) 9.3% Consumer Staples -20.6% $4.6 66
U.S. Bancorp (USB) 10.0% Financials -50.3% $4.5 21
JPMorgan Chase (JPM) 2.0% Financials -39.7% $3.3 44
Bank of New York Mellon (BK) 10.0% Financials -35.4% $1.6 61
General Motors (GM) 5.2% Consumer Discretionary -41.4% $1.11 56
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>>> DocuSign, Inc. (DOCU) provides cloud based software in the United States. The company offers e-signature solution that enables businesses to digitally prepare, execute, and act on agreements. The company sells its products through direct, partner-assisted, and Web-based sales. It serves enterprise businesses, commercial businesses, and small businesses, such as professionals, sole proprietorships and individuals. The company was 2003 and is headquartered in San Francisco, California. <<<
>>> PayPal Holdings, Inc. (PYPL) operates as a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants worldwide. Its payment solutions include PayPal, PayPal Credit, Braintree, Venmo, Xoom, and iZettle products. The company's payments platform allows consumers to send and receive payments, withdraw funds to their bank accounts, and hold balances in their PayPal accounts in various currencies. It also offers gateway services that enable merchants to accept payments online with credit or debit cards, as well as digital wallets. PayPal Holdings, Inc. was founded in 1998 and is headquartered in San Jose, California. <<<
>>> Square, Inc. (SQ) provides, together with its subsidiaries, payment and point-of-sale solutions in the United States and internationally. The company's commerce ecosystem includes point-of-sale software and hardware that offers sellers to payment and point-of-sale solutions. It provides hardware products, including Magstripe reader, which enables swiped transactions of magnetic stripe cards; Contactless and chip reader that accepts Europay, MasterCard, and Visa (EMV) chip cards and Near Field Communication payments; Square Stand, which enables an iPad to be used as a payment terminal or full point of sale solution; Square Register that combines its hardware, point-of-sale software, and payments technology; Square Terminal, a portable payments device that replaces keypad terminals, which accepts various payment types, such as tap, dip, and swipe, as well as prints receipts; and managed payments solutions. The company also offers various software products, including Square Point of Sale; Square Virtual Terminal; Square Appointments; Square for Retail; Square for Restaurants; Square Invoices, Square Online Store; Square Loyalty, Marketing, and Gift Cards; and Square Dashboard. In addition, it offers developer platform, which includes application programming interfaces and software development kits. Further, it provides managed payments, instant transfer, Square Card, Square Capital, and payroll. Additionally, it provides Cash App, which enables to send, spend, and store money; and Weebly that offers customers website hosting and domain name registration solutions. Square, Inc. was founded in 2009 and is headquartered in San Francisco, California.
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>>> 4 ETFs For Investing In FinTech And The Payments Industry
Nasdaq.com
by Prableen Bajpai
JUL 8, 2019
https://www.nasdaq.com/articles/4-etfs-for-investing-in-fintech-and-the-payments-industry-2019-07-08
Technological advancements are disrupting various industries, challenging traditional players to make timely adaptions in order to remain relevant. The payments industry is no exception. The innovations based artificial intelligence, cloud and biometrics coupled with demand for fast and secure cashless transactions, use of smart devices, internet penetration, increasing adoption of e-commerce and changing consumer demographics is bringing in a wave of digital transformation.
Here’s an overview of the payments industry and a look at the exchange traded funds (ETFs) providing an investment opportunity in this space.
Global revenue from payments surpassed $2 trillion in 2018 and is set to approach $3 trillion within the next five years. While cash continues to be king, the potential for digital payments is immense. The Digital Money Index of 84 countries that track the development of digital money readiness shows an improvement of 5.5% over the last five years.
China continues to lead the movement away from cash with the share of electronification increasing by more than ten-fold over the last five years, according to a McKinsey report. In terms of regions, North America is the first region to execute more than half of its transactions electronically. India is pushing its initiative dubbed as ‘Digital India’ which highlights “faceless, paperless, cashless” as one its professed roles.
Several studies recommend the potential benefits of digitized payments, ranging from time savings among consumers, increased sales revenues among businesses, reduced government administrative costs and higher tax collections. A research by Citi shows that “a 10% increase in digital money adoption by countries (constituting the index) would deliver a $150 billion lift in consumer spending, which raises business revenues, while digital payments also cut cash handling costs for services and businesses by $100 billion. Meanwhile, governments pocket $100 billion more in taxes and savings of $200 billion by digitizing disbursements. In total, up to $1 trillion of new flows would enter the formal economy.”
Here’s a look at some exchange traded funds which invest in companies that are a part of the transformation that’s underway.
The ETFMG Prime Mobile Payments ETF (IPAY) is a one of the oldest exchange traded funds providing exposure to stocks in the payments industry which is experiencing a shift from credit card and cash transactions to digital and electronic methods. The fund was launched in 2015 and has Prime Mobile Payments Index as its underlying benchmark index. In terms of geographies, the ETF has majority exposure to the U.S. with smaller exposure towards France, Netherlands, Germany and Japan. The ETF has a portfolio of around 40 stocks with the top ten holdings adding up to 48.62%.
The top ten holdings in its portfolio are:
Mastercard
Visa
American Express
PayPal Holdings
Fidelity National Information
Worldpay
FinServ
Square
First Data
Discover Financial Services
The ETF has $680.43 million as assets under management, 0.75% as expense ratio and has posted 35.14% year-to-date (YTD) returns.
Tortoise Digital Payments Infrastructure Fund (TPAY) is one of the recent ETFs, launched in 2019 providing access to the payments space. The ETF tracks the Tortoise Global Digital Payments Infrastructure Index represents 53 companies which are a prominent part of the global digital payments landscape. The ETF has $4.58 million as assets under management and an expense ratio of 0.40%. In the last three-months, it has given 8.93% returns.
The top holdings have a 45.62% allocation and comprise of companies such as:
Fleetcor Technologies
Square
First Data
FinServ
Worldpay
Fidelity National Information
American Express
MasterCard
Total System Services
Wirecard
Next is the Global X FinTech ETF (FINX). Launched in 2016, the ETF seeks to invest in companies that are on the leading edge of the emerging financial technology sector and are looking at industries such as insurance, investing, fundraising, and third-party lending through unique mobile and digital solutions. The ETF tracks the Indxx Global Fintech Thematic Index. The country-wise break-up reflects 70% exposure to the U.S., followed by countries such as Switzerland, Germany, Australia, New Zealand, Demark and Brazil.
With $415.58 million as assets under management and an expense ratio of 0.68% as expense, the fund has delivered 33.82% YTD returns. The ETF has close to 40 stocks in its portfolio with top ten holdings that combine to almost 55% of the portfolio.
First Data
FinServ
Fidelity National Information
Wirecard
Intuit
Square
PayPal Holdings
Adyen
Guidewire Software
Black Knight
ARK Fintech Innovation (ARKF) is another ETF has been launched in 2019. ARKF is an actively managed ETF with a focus on companies engaged in the theme of fintech innovation. The ETF holds a portfolio between 35-55 stocks with a large-cap bias. The ETF has posted 4.93% YTD returns. It has $72.09 million as assets under management and an expense ratio of 0.75%.
The top ten holdings of the ETF are:
Square
Tencent
Apple
Zillow
com
Alibaba
PayPal
Rakuten
LendingTree
Line
Final Word
Global investment in financial technology ventures more than doubled in 2018, to $53.3 billion. A major part of it came for a single record funding round worth $14 billion in Ant Financial, best known for its mobile payments service Alipay.
Juniper Research projects that the number of people using digital wallets touch nearly 50% of the world’s population by 2024, pushing wallet transaction values up by more than 80%. Overall, the global digital payments market is expected to reach $7.64 trillion by 2024, recording a CAGR of 13.7% (2019-2024).
With the advancement in payments industry and colossal scope for growth, these ETFs are a favorable way to be a part of the digital journey, which has begun across the globe.
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>>> BlackRock Becomes Key Player in Crisis Response for Trump and the Fed
Bloomberg
By Annie Massa
April 17, 2020
President sought advice from Larry Fink in coronavirus fallout
World’s largest asset manager also helped in ‘08 crisis
https://www.bloomberg.com/news/articles/2020-04-17/blackrock-takes-center-stage-with-trump-seeking-to-calm-markets?srnd=premium
As President Donald Trump grappled with the coronavirus outbreak last month, he boasted at a press conference of tapping a secret weapon for advice: Larry Fink.
The chief executive of BlackRock Inc. provided insight to Trump on coping with the fallout from the pandemic -- and once again put his firm at center of a white-hot economic emergency.
BlackRock is no stranger to stepping in during a financial crisis cleanup. It played a similar role in 2008. But back then, it was a smaller firm with a focus on fixed income, closer to Pacific Investment Management Co., which had renowned money managers Mohamed El-Erian and Bill Gross at the helm.
More than a decade later, the investing landscape has shifted. BlackRock has a premiere role in helping the Federal Reserve stabilize markets. The central bank has hired the firm to help manage its economic relief efforts. Beyond U.S. borders, the Bank of Canada has called on the asset manager as it shapes its response to the meltdown.
BlackRock’s government connections reflect the dominance it has achieved in the asset management arena since the last financial crisis. It became the world’s largest asset manager with $6.5 trillion in assets -- a size and breadth that make the firm an essential player on Wall Street, in Washington, and beyond.
That may be an advantage amid the current tumult. “The companies that are going to come out in better shape are going to be the big businesses,” said Greggory Warren, an analyst at Morningstar Inc.
Financial crises can mark inflection points in investor preferences. After 2008, inexpensive index-based investing took off, buoying BlackRock, which holds about two-thirds of its assets in passive funds. Scale allows a massive firm like BlackRock or competitor Vanguard Group Inc. to offer prices that were once unheard of in the industry. Think U.S. stock-tracking funds that cost a few cents for every $100 invested.
“The one thing that rules in this world is cheap,” said Eric Balchunas, an analyst at Bloomberg Intelligence.
The economic recession following the 2008 crash helped set that tone. In the trenches of that contraction, investors became more comfortable using exchange-traded funds, which are tethered to indexes and can be bought or sold at any time in the trading day. Those funds hold about $4 trillion in the U.S., compared to about $531 billion in 2008, according to data compiled by Bloomberg.
BlackRock owes much of its dominance to a well-timed bet on those products. The firm got its start as a bond-focused shop, and had about $1.3 trillion in assets at the end of 2008. Today it is a formidable giant, overseeing about five times that sum. BlackRock first moved into ETFs with its purchase of Barclays Global Investors in 2009, a defining moment in the company’s history. The British bank sold the prized unit after rejecting U.K. government bailout money.
Moving into passive investing put BlackRock’s growth “on steroids,” Warren said. It is the world’s largest global issuer of ETFs today.
BlackRock’s government advisory business also cemented some crucial relationships in the fallout from 2008. BlackRock scored mandates to manage portfolios of toxic assets from Bear Stearns Cos. and American International Group Inc., playing to Fink’s roots in structuring mortgage-backed securities.
Today, BlackRock’s role is even more expansive. The Fed enlisted the New York-based firm to shepherd three debt buying programs. Canada’s central bank is bringing in BlackRock as an adviser in purchases of commercial paper, a form of short-term debt companies use to fund day-to-day expenses like payroll.
Beyond Covid-19-related mandates, the firm also won a contract to help incorporate sustainability into the European Union banking system.
“I do believe it’s going to continue to bring opportunities for us,” Fink said on an earnings call on Thursday, referring to BlackRock’s government assignments. He added he’s “very proud of” such work.
Another giant located across the country, Pimco, is reprising a role it played in the 2008 financial crisis too. The Fed once again called on Pimco as the investment manager for its purchases of commercial paper.
The Newport Beach, California-based firm oversaw $1.8 trillion at the end of the first quarter. In the intervening years since the last financial collapse, it has stuck to its original ethos as an active fixed income investment company.
Along with the rest of the active fund management industry, Pimco faced some challenges in an era when belief in star fund managers began to fade. One of the most dramatic examples of that arc was investing legend Bill Gross.
Gross, Pimco’s former chief investment officer, founded the Pimco Total Return Fund in 1987 and turned it into a behemoth. The fund had almost $300 billion in assets at its peak in 2013, and generated annualized returns of 7.8% from inception through his last day.
But when Gross left for Janus Henderson Group Plc in September 2014, an investor exodus followed. The fund suffered total redemptions of more than $100 billion in the 12 months after he departed.
Pimco spokesman Michael Reid responded to a request for comment on Gross by pointing to remarks from Morningstar analyst Eric Jacobson. “The firm didn’t flinch,” Jacobson said. “Pimco managed to keep performance competitive or better in most cases despite the outflows.”
“As an active manager, Pimco’s defensive positioning and liquidity management enabled us to navigate unprecedented market volatility,” Reid said in a statement. “We now see some extremely attractive long-term value in higher-quality segments of the investment-grade credit and mortgage markets as well as in more resilient areas of emerging markets.”
Gross was also known for his discursive investor letters that touched on topics like his dead cat and the eroticism of sneezing. In recent years, Fink’s annual missives have attracted similarly broad industry attention, albeit with a more staid style.
Proponents of active management argue that the industry gains additional edge in times of volatility. Though cheap index funds are easy to love when markets rise, active managers say they’re better suited to pick through the rubble after a downturn. (BlackRock has significant resources in active funds of its own, with $1.8 trillion in such strategies.)
Size and ties to governments put firms like BlackRock and Pimco, which is owned by German insurance giant Allianz SE, on stronger footing as the world navigates the unprecedented changes brought by the pandemic, said John Morley, a Yale University Law School professor who studies the regulation and structure of investment funds.
“The small asset managers may not have the resources to weather the storm,” he said.
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Visa, Mastercard, Fiserv - >>> How can the companies that help us pay for goods survive a coronavirus shutdown?
MarketWatch
April 14, 2020
By Emily Bary
https://www.marketwatch.com/story/how-can-the-companies-that-help-us-pay-for-goods-survive-a-coronavirus-shutdown-2020-04-14?siteid=bigcharts&dist=bigcharts
The payments industry in the age of COVID-19: PayPal and Square look for new opportunities, while Visa and Mastercard look to survive a new kind of economic downturn
As the COVID-19 outbreak curtails consumer spending, some younger payment-processing companies are getting creative, while the stalwarts are betting their resilient business models can withstand the latest economic downturn.
PayPal Holdings Inc. PYPL, +3.26% and Square Inc. SQ, +6.57% are among a handful of financial-technology companies that have been approved to distribute small-business loans through their platforms as part of the Paycheck Protection Program, as well as to help disburse stimulus payments to individuals.
Despite new opportunities like those, there are still concerns about how the payments industry will fare as the COVID-19 crisis shakes the global economy. Industry giants Visa Inc. V, +4.38% and Mastercard Inc. MA, +5.35% have survived many recessions, but there’s little historical parallel for an event that makes wide swaths of the population afraid to leave their homes. The credit-card networks will be relying on their high margins and enhanced e-commerce exposure to carry them through.
Business in the age of COVID-19: Read how other large companies will be affected by the coronavirus
Though shoppers might be eager to stock up on canned goods, toilet paper and other essentials during the crisis, that can’t make up for the many areas where spending has all but dried up. Retail store closures mean that fewer people are buying discretionary items, restaurants can only do so much business by selling takeout to a wary public, and tourism is virtually nonexistent.
Because payments companies touch so many aspects of the economy, it’s unclear when their businesses could return to normal. No one knows how long or how deep a coronavirus-driven recession would last, which could pressure spending until consumers feel more certain about the economic landscape. Some areas, like travel, may be especially stubborn until a vaccine becomes widely available.
Of course, e-commerce is far more prevalent now than it was a decade ago, giving payment providers a bit of a cushion even as surging unemployment and general unease about the economy prove tougher hurdles to spending. Analysts say PayPal, which conducts nearly all of its business online, could withstand COVID-19 better than most.
While the major players are likely to feel the sting now, a heightened awareness of germ spread could help ultimately accelerate plans by Visa and Mastercard to grow adoption of contactless payments in the U.S.
How the stocks are reacting
Mastercard shares dropped 19% in the first quarter, while Visa shares fell 14%, PayPal shares decreased 11%, and Square shares declined 16%. The S&P 500 SPX, +2.67% was off 20% in the first quarter, while the Dow Jones Industrial Average DJIA, +2.99%, which counts Visa as a component, fell 23%.
Analysts are overwhelmingly bullish on Visa, Mastercard, and PayPal shares, and while Square remains the most controversial of the four, sentiment has become more bullish in recent months as the stock pulled back. Of the 40 analysts who cover the stock, 19 rate it a buy as of April 14, while 19 rate it a hold and two rate it a sell. There were 18 buy ratings, 16 hold ratings, and six sell ratings in late December.
The companies and their numbers
Visa: The card giant has seen “a rapid deterioration of cross-border travel-related spending,” according to a March 30 filing in which the company issued its second profit warning since Visa’s late-January earnings report. Visa told investors in this latest update to brace for mid-single-digit March-quarter revenue growth, below its initial forecast of low double-digit growth. Areas that had seen the greatest negative impacts over the course of March included travel, restaurants, entertainment and fuel.
Revenue and earnings estimates have fallen for Visa’s fiscal second quarter, which ended in March. Analysts tracked by FactSet modeled $5.79 billion in revenue and $1.36 a share in earnings as of late March, down from estimates of $6.11 billion and $1.46 a share, respectively, as of late December.
For the full fiscal year ending in September, the consensus forecast called for $23.41 billion in revenue and $5.57 a share in earnings as of late March, below late-December forecasts of $25.43 billion and $6.21 a share, respectively.
Mastercard: While the company argued back in January that its e-commerce business provided a “natural hedge” on the coronavirus outbreak in China, Mastercard has since acknowledged more risks. The company has issued two revenue warnings since its January earnings report, with the latest one on March 24 calling for low- to mid-single-digit net revenue growth in the first quarter. That’s down from an initial forecast of low-teens growth. While it faces a challenging consumer-spending landscape, Mastercard also highlighted weakness in business spending, pressuring an emerging-growth area for the company as it tries to capture more commercial volume.
Analysts surveyed by FactSet modeled $4.08 billion in first-quarter revenue as of late March, down from an estimate of $4.39 billion at the end of December. Earnings estimates declined to $1.78 a share as of the end of March from $2.02 a share at the end of December.
For the full year, analysts modeled $17.42 billion in revenue as of late March, down from their December estimate of $19.17 billion. They were looking for $7.83 a share in full-year earnings, below their December forecast of $9.05 a share.
PayPal: Unlike Visa, Mastercard, and Square, the company generates nearly all of its revenue from online sales, which was the focus of its Feb. 27 business update. At that point, the company disclosed in a press release that its “business trends remain strong” though cross-border e-commerce had been negatively impacted by the outbreak. PayPal told investors to expect revenue “toward the lower end” of its previously issued forecast of $4.78 billion to $4.84 billion. The company announced April 10 that it was approved to offer access to Paycheck Protection Program loans through the Small Business Administration.
The FactSet consensus reflects that new disclosure, as analysts modeled $4.79 billion in first-quarter revenue as of the end of March, below the $4.84 billion they were projecting as of late December. They also called for 77 cents in adjusted earnings per share, below their late-December projection of 82 cents.
For the full year, analysts expected $20.61 billion in revenue and $3.39 a share in earnings as of late March, below the $20.74 billion and $3.49 a share, respectively, that they had been calling for at the end of 2019.
Square: The company, which has heavy exposure to small- and medium-sized businesses, disclosed on a March 24 investor call that payment volume during the prior 10 days was off 25% from a year earlier, with greater declines in areas that were early to issue shelter-in-place orders. The company also lowered its first-quarter outlook and pulled its full-year forecast. It has been offering tools to sellers that enable them to do business online and offer curbside pickup. Square Capital Lead Jackie Reses tweeted April 13 that the company has been approved for Paycheck Protection Program lending through the SBA.
While revenue estimates for Square’s first quarter have actually increased since December, rising to $1.3 billion from $1.21 billion, they’ve fallen for the second quarter and the full year. Analysts modeled $5.35 billion in full-year revenue as of March 31, down from their estimate of $5.68 billion in late December.
Analysts predicted 13 cents a share in first-quarter adjusted EPS as of March 31, below the 16 cents a share they were calling for in late December. Full-year estimates fell to 64 cents from 96 cents.
Other payments companies to watch: Shopify Inc. SHOP, +12.15% , Global Payments Inc. GPN, +9.84% , Fiserv Inc. FISV, +5.11% and Fidelity National Information Services Inc. FIS, +4.04% .
What analysts are saying
• “A recession coincident with the coronavirus-related social distancing measures could be meaningfully worse for Visa and Mastercard than the [global financial crisis] (because of sizable impact on travel & discretionary spend).” — Bernstein analyst Harshita Rawat, who rates both stocks at outperform with a $190 price target for Visa and a $300 price target for Mastercard.
• “Amid the severe business disruptions caused by the coronavirus pandemic, investors have become highly sensitive to the consequences of companies across various industries accepting government support… Importantly, we do not believe Visa, Mastercard, or PayPal will require government bailouts and do not expect them to face future limitations on share repurchases as a result.” — Instinet analyst Bill Carcache, who has buy ratings on all three stocks.
• “It seems like a definite messaging opportunity for some of the large wallet providers as well as the big card issuers and payments companies like Visa to promote the sanitary aspects of contactless payments,” — Jordan McKee, the research director at S&P Global Market Intelligence’s 451 Research, told MarketWatch.
• “We believe PayPal will be one of the lesser affected companies in our universe because of the heavy weighting of online payment transactions, and we believe PayPal will grow revenue through this period.” — William Blair analyst Robert Napoli, who rates the shares at outperform.
• “Square’s unique and now challenged exposure will make the stock a proxy for some of the most vulnerable businesses, where federal response will be crucial.” — Citi analyst Peter Christiansen, who downgraded Square’s stock to neutral from buy on March 18 while cutting his target price to $50 from $99.
• “We think PayPal and Square are likely to earn the majority of lender origination fees” — Barclays analyst Ramsey El-Assal, who said that lenders will receive 5% from the SBA for loans below $350,000, which he thinks will represent the bulk of PayPal’s and Square’s lending. He expects the program fees to “contribute high margins.”
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>>> Mom and Pop Are On Epic Stock Buying Spree Fueled by Free Trades
Bloomberg
By Lu Wang and Vildana Hajric
February 21, 2020
https://www.bloomberg.com/news/articles/2020-02-21/free-stock-trades-are-stirring-an-epic-mom-and-pop-buying-frenzy?srnd=premium
Ameritrade’s million-trade days in quarter exceeds all of 2019
Brokerage volume explodes as hot stocks like Tesla lure money
Small investors are back. In a big way.
Their fingerprints are on Apple Inc.’s staggering rally. They piled into Tesla Inc. as it tripled, and turned speculative fliers like Virgin Galactic Holdings Inc. into some of the most heavily traded shares in the country. Why the enthusiasm? Some see a link to decisions by brokerages to cut commissions on trades to nothing.
While it’s tough to know what’s causing what -- bull markets are fueled by new converts but also lure them -- trading volume at online and discount brokers has exploded. TD Ameritrade Holding Corp., which started offering free trading in October, has seen million-trade days multiplying at a record pace.
Discount brokerages' trading volume explode
Along with E*Trade Financial Corp., daily average revenue trades -- a standard industry metric that may be a bit of a misnomer now since buying and selling is free -- have almost doubled to an all-time high since last September, data compiled by Sundial Research showed.
“When you take a bull market and juice it with zero commission trading, we can expect it to generate interest among retail accounts. That, it did,” said Jason Goepfert, president of Sundial. “Retail traders have become manic.”
Individual investors were seen as indifferent participants for much of the 11-year bull market. No more. The latest leg of their emergence times closely with October, when E*Trade, Charles Schwab and TD Ameritrade slashed commission fees to zero. Not that it’s firm proof of anything, but since the start of that month, the S&P 500 is up 13% and the Nasdaq 100 has surged 24%.
Conversations with a handful of clients found lots of praise for zero-commission trades but mostly conservative purchases -- index funds and blue chips. Matt Hermansen, 23, who works for a concrete company in Oakland, California, said the absence of fees makes him more willing to trade.
“I’ll invest smaller amounts. Before I never really invested anything less than $1,000, $500 minimum,” he said in a phone interview. “Now if I have enough to buy an extra share, I’ll do it. I’ll do like $300.”
At TD Ameritrade, the number of days where the amount of trades topped 1 million reached 38 during the fiscal first quarter ended Dec. 31, according to Steve Boyle, interim president and chief executive officer. That compares to 23 such days in all of fiscal year 2019.
It’s “a new world in discount brokerage where price no longer clouds the comparison for trades,” Boyle said in an earnings statement on Jan. 21. By that date, the firm’s monthly volume had already risen 40% from a year ago, averaging 1.4 million trades per day.
At Charles Schwab, similar trends has played out. Daily average revenue trades have increased 74% since the firm’s fee cut, Sundial’s data showed.
Randy Frederick, a vice president of trading and derivatives at Charles Schwab, says the surge in trading also reflects a growing confidence in the bull market. Indeed, from the coronavirus outbreak to Apple’s sales warning, nothing has been able to stop shares from marching higher.
“It’s partially driven by free commissions, but I don’t think it’s just that, because not everyone is offering free commissions,” Frederick said. “The fact that we have been in a bull market for a long time, people are just optimistic. Things are going up and they continue to go up.”
U.S. households are turning more optimistic on the stock market. According to the latest sentiment reading from the Conference Board, the share of respondents expecting stocks to rise in the next year advanced to 43.1% in January, the highest since October 2018.
More Americans think stocks will rise over the next 12 months
Hot stocks get the most attention. At TD Ameritrade, Apple, Microsoft Inc., Tesla and Virgin Galactic have been among the highly traded this year, according to JJ Kinahan, the firm’s chief market strategist. Shares of the two tech giants have climbed at least 9%, double the S&P 500’s gain. Tesla, Elon Musk’s automaker, and Virgin Galactic, Richard Branson’s space-tourism company, have done even better, with triple-digit advances. Virgin Galactic, in particular, has seen retail investors talking up their positions on message boards like r/wallstreetbets on Reddit.
“A lot of our millennial clients over the past six months were buyers of Tesla,” Kinahan said. “Younger people buy products they are familiar with, or more importantly, think are going to be viable products down the road,” he added. “It does make sense to say that some of these, maybe Virgin Galactic, may be a product that makes sense in 10 years.”
For Peter Cecchini, chief global market strategist at Cantor Fitzgerald LP, affection among retail investors for both tech stocks and loss-making companies is creating flashbacks to the internet frenzy in late 1990s.
“There’s sometimes no fundamental reason for it. It just is based on perception -- a perception based on narratives that run only an inch deep,” he said in note. “Let’s see how much longer it persists. This kind of activity often unwinds much faster than the wind up.”
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>>> Morgan Stanley to Buy E-Trade, Linking Wall Street and Main Street
The $13 billion deal will give a powerful Wall Street firm control of a major presence in the world of online brokerage firms.
The New York Times
By Michael J. de la Merced, Kate Kelly and Emily Flitter
Feb. 20, 2020
https://www.nytimes.com/2020/02/20/business/morgan-stanley-etrade.html
Morgan Stanley is betting its future on Main Street.
The Wall Street giant moved further from its investment banking origins on Thursday with an agreement to buy the discount brokerage firm E-Trade for about $13 billion, the biggest takeover by a major American lender since the 2008 global financial crisis.
The addition of E-Trade would allow Morgan Stanley to tap into a new source of revenue: the smaller-volume trades of the country’s so-called mass affluent, people who are wealthy enough to have some savings but not rich enough to buy into hedge funds or seek out a money manager. If it goes through, the deal will put Morgan Stanley, which does not have retail bank branches to draw in new asset-management customers, on firmer footing with competitors like Bank of America and Wells Fargo.
It would also give Morgan Stanley a big share of the market for online trading, an additional 5.2 million customer accounts and $360 billion in assets.
Morgan Stanley’s chief executive, James P. Gorman, said the merger would disrupt neither E-Trade clients nor Morgan Stanley customers, but ultimately result in more services for all.
The deal highlights the increasing convergence of Wall Street and Main Street: Elite bastions of corporate finance are seeking to cater to customers with smaller pocketbooks, and online brokerage firms that once hoped to overthrow traditional trading houses are instead suffering from a price war that has slashed their profits.
It also reflects a continuing shift in strategy for Morgan Stanley, which long relied on fees from high-finance services like mergers, stock offerings and massive trading desks but has lately embraced steady fees over bigger paydays and bigger risks.
Under Mr. Gorman, who has led the bank for a decade, Morgan Stanley has de-emphasized the businesses of jet-setting investment bankers and aggressive Manhattan traders, preferring the predictable and less costly realm of wealth management. It’s a strategy playing out all along Wall Street: In the dozen years since the start of the financial crisis, major financial firms from Credit Suisse to Goldman Sachs have embraced what are considered lower-risk business lines.
“This continues the decade-long transition of our firm to a more balance-sheet-light business mix, emphasizing more durable sources of revenue,” said Mr. Gorman, whose most transformative deal at Morgan Stanley before Thursday was its acquisition of Smith Barney’s retail brokerage firm in 2012.
E-Trade was an enticing target: It has struggled as brokerage firms slashed fees in a fight that peaked last fall when Charles Schwab eliminated fees for the trading of stocks and exchange-trade funds, and later agreed to buy TD Ameritrade for $26 billion.
Michael McTamney, who researches banks for the ratings agency DBRS Morningstar, said the deal accelerated Morgan Stanley’s growth plans. The bank already had a strong high-net-worth client base, he said, and now “they’ll be able to bring in this next generation of wealth via the E-Trade platform.”
If the deal goes through — it needs the approval of E-Trade shareholders and regulators — more than half of Morgan Stanley’s pretax profits will come from wealth and investment management, compared with 26 percent a decade ago.
Morgan Stanley’s $2.7 trillion in assets are largely tied to big companies and wealthy individuals. The E-Trade deal would expand its access to the comparatively well heeled, a group that encompasses more than 20 million households in the United States.
But Morgan Stanley could face a challenge luring this sort of investor toward its higher-touch investment management services.
Many E-Trade customers manage their own investments because of their intense distaste for the old-fashioned brokerage business. Others are hobbyists, trading a chunk of their retirement portfolios or some mad money. Both types have benefited greatly from decades of price wars that have made it possible for customers to pay nothing to maintain a brokerage account. Morgan Stanley will raise those fees at its peril.
But the addition of E-Trade offers another way to make money from those customers. Morgan Stanley could use the brokerage firm as the vehicle for delivering other products and services, such as shares of initial public offerings it has underwritten.
In Mr. Gorman’s words, the combination would unite Morgan Stanley’s “full-service, adviser-driven model” with E-Trade’s “direct-to-consumer and digital capabilities.”
Morgan Stanley is betting that regulators in Washington will approve what is perhaps the most consequential acquisition by a so-called systemically important American bank — the too-big-to-fail variety of financial institution — since 2008.
Under the Obama administration, officials at the Federal Reserve fretted about the nation’s biggest banks growing through mergers. Daniel Tarullo, a former Fed governor, said in a 2012 speech that the central bank should have a “strong, but not irrebuttable, presumption of denial” for takeovers by America’s banking titans.
But the Fed has become more industry friendly during the Trump administration, particularly with the addition of officials like Vice Chairman Randal K. Quarles, a former bank lawyer who is helping reassess the rules put in place after the financial crisis. The central bank recently approved the combination of BB&T and SunTrust, paving the way for the creation of the sixth-largest U.S. commercial bank.
The acquisition could look attractive to regulators from a financial stability perspective: The deal would infuse the Wall Street bank with stable deposits and reliable revenue streams. But it will also make Morgan Stanley more of a behemoth.
Morgan Stanley doubtless hopes an E-Trade deal goes more smoothly than a past effort to pull in retail clients. Its merger with Dean Witter Reynolds two decades ago foundered amid a clash between Morgan Stanley’s Wall Street aristocrats and Dean Witter’s more down-market brokers. Since then, however, the bank has been steadily shifting toward asset management — one of a number of approaches major banks have been trying to court Main Street.
Morgan Stanley’s traditional rival, Goldman Sachs, created a retail-focused lending arm, Marcus, in 2016 and teamed up with Apple last year to offer a credit card. Last month, Goldman said it intended to expand its retail deposit base to $125 billion, and its consumer loan and card balance to $20 billion, over the next five years.
Investors seem to be more taken with Morgan Stanley’s continuing shift than with Goldman’s, at least based on the Wall Street scoreboard of stock prices. Shares in Morgan Stanley have climbed nearly 33 percent over the past 12 months, while those in Goldman have risen about 19 percent.
Late last year, JPMorgan Chase — already known for its enormous banking operations in both the consumer and the institutional areas — established a new platform that is meant to combine financial advisory services within its bank branches with wealth-management and online brokerage offerings.
And Bank of America, whose acquisition of Merrill Lynch during the financial crisis made it a heavyweight in the wealth-management business, has moved to court less-wealthy clients as well.
Under the terms of the deal announced on Thursday, Morgan Stanley will buy E-Trade using its own stock. Its offer is worth about $58.74 a share as of Wednesday’s market close, a 30 percent premium on the value of the online brokerage’s shares.
E-Trade’s chief executive, Michael Pizzi, would continue to run the business upon the deal’s closing, which is expected by year’s end.
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