Page 1088 - Mad Hedge Fund Trader

The Rebirth of Western Union

This is not your father’s Western Union (WU).

Western Union (WU), the payment remittance service, is a legacy company that is going to harvest the most from a full migration to digital.

That is exactly what is currently happening.

Part of the 25% gain in the stock this year is a nod of approval in the direction the company is heading to.

At its most recent investors’ day presentation, the firm boosted its positive earnings guidance, which was primarily driven by its growth strategy on different verticals.

Western Union’s revamped growth strategy is buttressed by its ability to meet increasing demand from global consumers and businesses for fast and reliable cross-border money transfer and payment solutions.

The company is shying away from the brick-and-mortar operations of yore and choosing a strategy that leverages Western Union’s continued investment in key capabilities such as digital, real-time account payout, compliance, and artificial intelligence.

These nice additions have positioned the company to show strength in one of the most holistic and versatile payment engines in the world.

Western Union has its eyes set on expanding its core consumer-to-consumer business as well as other payment segments where global organizations can utilize its cross-border solutions to expand into fresh markets or better serve existing customers.

Western Union predicts a 23% operating margin by 2022 and a low-double-digit EPS CAGR through 2022.

The operating margin and EPS targets presume a 2020-2022 revenue CAGR of 2% to 3%, compared with the 2019 revenue base excluding divestitures.

The revenue ramp up signals growth in consumer money transfer, driven by its website westernunion.com and other third-party digital services and mid-single-digit growth from Business Solutions.

Operating profit margin and EPS targets also reflect $150 million in total annual savings expected by 2022.

The company expects to succeed in operating efficiencies from initiatives aimed at optimizing commissions and reducing third-party spending.

These initiatives will boost the bottom line an extra $50 million in annual savings to operating profit by 2022.

From 2020 to 2022, Western Union expects to extract more than $3 billion of operating cash flow and return approximately $2.5 billion to $3 billion to shareholders through dividends and share repurchases.

The company is a cash cow and attractive for many traditional investors who value this type of cash flow.

Other pathways to higher revenue include partnerships that provide customized payments solutions to organizations such as e-Commerce businesses expanding into emerging markets, end-to-end cross-border solutions to third-party organizations to solve consumer money transfer needs, and cross-border services, such as foreign exchange and cash management.

Slagging off the brick-and-mortar payments model for the digital platform is the low-lying fruit here and Western Union has a phase of overperformance in them before they will be thwarted with substantial revenue resistance.

Could this one day turn into a legitimate and mature fintech payment platform such as PayPal Holdings (PYPL) and Square (SQ)?

Offering low cost and efficient services is the first step in the right direction and I can say I’ve seen weirder things happen in the world.

Western Union certainly is in a position of strength as it cruises into the first innings of its digital migration and I believe there is more room to run for the stock until $30.

September 27, 2019 - Quote of the Day

Tech Letter

“New technology is not good or evil in and of itself. It's all about how people choose to use it.” – Said Writer Jason Pargin

September 27, 2019 - MDT Pro Tips A.M.

MDT Alert

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more

September 27, 2019

Diary, Newsletter, Summary

Global Market Comments
September 27, 2019
Fiat Lux

Featured Trade:
(IF BONDS WON’T GO DOWN, STOCKS CAN’T EITHER),
($NIKK), (TLT), (TBT), ($TNX),
(TESTIMONIAL)

BioTech Alert - (AMGN) September 26, 2019 - BUY

Biotech Alerts, Biotech Letter

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more

September 26, 2019 - MDT Pro Tips A.M.

MDT Alert

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more

September 26, 2019

Diary, Newsletter, Summary

Global Market Comments
September 26, 2019
Fiat Lux

Featured Trade:

(THE HIGH COST OF TRADE TARIFFS),
(JOIN US AT THE MAD HEDGE LAKE TAHOE, NEVADA, CONFERENCE, OCTOBER 25-26, 2019)

The High Cost of Trade Tariffs

Diary, Newsletter, Research

Having been at the inception of the international trading order, first for The Economist magazine and later with Morgan Stanley, I can tell you that the initial reasons for unleashing globalization have long been forgotten.

It’s really very simple.

If someone is making a ton of money off of you, they are less inclined to blow you up. Profits are a great pacifier, and no one wants to destroy the people who have been buttering his bread.

During the 1960s, the US defense establishment went into a panic when China exploded its first atomic bomb.

Some 59 years later, the exponential growth of trade between our two countries have caused the risk of a mutual nuclear war to fall to near zero.

And what country in the world today would love to bomb the US off the face of the earth if it had the remotest ability to do so?

North Korea, which conducts no trade to speak of with the US.

There is another big reason why protectionism fails.

It is counterproductive in its impact on the American economy.

And not in a small way.

There are more than 45 million Americans living in abject poverty, stretching every dollar they have to make ends meet, saving nothing.

The apparel industry employs 135,000 Americans.

Can one really justify tariffs that increase the price of clothing for the 45 million in order to save a few of the 135,000 low-wage jobs?

A three-year 15% tariff enabled domestic producers to raise their prices, thereby increasing the costs of many American manufacturers.

By one estimate, each U.S. job “saved” cost $550,000 as the average bolt-nut-screw worker was earning $23,000 annually.

Ronald Reagan imposed “voluntary restraints” on Japanese automobile exports, thereby creating 44,100 U.S. jobs.

But the cost to consumers was a staggering $8.5 billion in higher auto prices, or $193,000 per job created, six times the average annual pay of a U.S. autoworker.

And there were big job losses in sectors of the economy into which the $8.5 billion of consumer spending could not be spent, like clothing.

In 2012, Barack Obama boasted that “over a thousand Americans are working today because we stopped a surge in Chinese tires.”

But this cost about $900,000 per job, paid by American purchasers of vehicles and tires.

The non-partisan Peterson Institute for International Economics says that this money taken from consumers reduced their spending on other retail goods, bringing the net job loss from the job-saving tire tariffs to around 2,500.

I could go on and on.

In researching this article, I stumbled across the map below showing the largest trading partner for each individual state.

While most states have Mexico or China as their largest trading partner, you would NOT believe some of the results!

Nevada-Switzerland
South Carolina-China
Delaware- Belgium
Florida-Brazil
Connecticut-France

So the bottom line here is to let free-market capitalism work unrestrained, and let whatever creative destruction taking place proceed full speed ahead.

Creative destruction is something the US does better than anyone else.

It’s why the US still has the largest and strongest economy by a mile, with the best major country long-term growth rate.

Don’t mess with success. You may not like the alternative.

September 26, 2019 - Quote of the Day

Diary, Newsletter, Quote of the Day

When the legendary economist, John Maynard Keynes, was asked if the world had ever seen a Great Depression before, he responded, “Yes, it was called the Dark Ages, and it lasted 400 years.”

Trade Alert - (EBAY) September 25, 2019 - BUY

Tech Alert

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more