“Cash Is Dead: Profiting from the Conversion to a Cashless Society”

By Travis Johnson, Stock Gumshoe, April 6, 2007

Orbus Investor bring us this tease, for “The currency 79 Nations are turning to.” And I’ve also seen a similar email from him called “The Company Behind the World’s New Money,” pushing the same stock tease to sell the newsletter.

The sell is fairly simple (though long), basically that the international push to cashless payments is a juggernaut that will make you rich.

In the words of Sam Hopkins, the analyst for Orbus, “there’s a new world currency gaining circulation – it’s completely taking the place of cash – and every single time a transaction is made in this currency, you could be making money, too.”

Some details are provided — 210 billion transactions every year, almost 8 trillion spent just on personal items through cashless payments, and 10 trillion by governments who are making their benefit programs cashless.

Hopkins writes, “we’ve already hit the tipping point to the complete annihilation of cash transactions. Because the world’s most influential power brokers are leading this revolution: governments and banks.”

So that sounds appealing — as we’ve seen from some payment processors, like the hugely successful Mastercard IPO, taking a little off the top of cashless payments can be a huge money maker and these companies can certainly capture the market’s imagination.

So what is this company?

“The less cash is used around the world . . . the more money you could make.”

Orbus provides some clues:

Jim Cramer called it his “best sleep at night stock of the year” at one point.

“this company has been on the leading edge of this growing movement to obliterate cash since the late 1980s.”

95.49% return on equity.

$31 million in cash.

“their market share by revenue is estimated at an impressive 48% worldwide.”

So that ought to be enough to sniff this one out … and the Stock Gumshoe, thanks to his trusty informatipercolator, will share with you that the name of this company is …

VeriFone Holdings (PAY)

They did indeed have 95.49% return on equity last year, though according to Google Finance the prior year it was 15% so don’t get too excited.

And while they’ve been public for only about two years under this name and ticker, they have been around a while with several different stock listings on the NASDAQ and NYSE — they were founded in 1981.

Jim Cramer did utter that “best sleep at night” line about the company on CNBC.

So I’m convinced this is the company Orbus is teasing us about … now, is it worth investing in?

I don’t know. It’s not cheap, with a trailing PE of about 60 and a forward PE of something like 20, depending on who you listen to. But the industry they’re in is certainly a massively growing one, and they do have some good penetration.

Verifone, for those who don’t know the company, makes many of the terminals you see at grocery stores, gas stations, etc. for swiping your debit and credit cards. They’re also moving into contactless payment offerings, and may be a player in cell phone payments when that goes mainstream in the US (I don’t know to what extent they do this internationally right now). They have had some relatively large contract wins, including KeyCorp banks, Mexican McDonald’s restaurants, and others, and they certainly have a big international presence.

I don’t know to what extent they fulfill the promise of the ad’s real tease, which is getting a cut of all electronic transactions with this “new currency”, because I haven’t looked into their financials enough to know whether they primarily make money on sales and leasing of equipment, or services, or if they get their funds by taking a percentage of transactions. That would clearly be something to know if you wanted to invest in this one.

They’re presenting at a Suntrust conference next week if you want to hear more from the company itself.

There are other companies certainly in this space, including Visa, Mastercard and Amex as well as other specifically electronic payment-based and card and/or equipment companies like Net 1 UEPS (which wins for oddest name), Hypercom and NCR, so they may be worth a look as well if you’re interested in this sector.

And that’s about as far as the Stock Gumshoe will take you — you’ve got the company that may or may not revolutionize international currency, now it’s your turn to check it out. Feel free to comment if you know anything about these guys or want to share. Best of luck.

Share Your Thoughts

ShowHide Comments (3)
    1. Anonymous
      Apr 8 2007, 01:11:00 pm

      A new teaser?

      TFN E-News Alert – 4/8/07

      Commodity Supercycle: Buy this Canadian mining powerhouse now!
      By J. Christoph Amberger

      If you look at the media reports about the shakeout in the subprime mortgage industry and the empty order books of home builders, you could think that the American economy is about to come to a standstill, with both the U.S. dollar and the American stock markets about to crash.

      And you’d be right to be concerned. Every new home that remains unbuilt in the United States causes economic fallout. Demand for construction work and materials drops. Home prices stagnate. Especially in the commodities sector, the consequences are palpable. After all, each new house requires around 400 pounds of copper in the form of wiring, fixtures, etc.

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      And there is a patently easy way to do so: Chris has identified a publicly traded Canadian mining company that 100% owns a copper, silver, zinc and lead mine located in southern Mexico. This company has zero debt and is increasing its output at a triple-digit rate, even as costs go down. In Q4 of 2006, it had a production rate of 1,000 tpd and was running at 103% of design capacity.

      Mill throughput is estimated to jump to 2,200 tons per day by next year. And at the same time, economies of scale and changes in mining methods will bring production costs down — so much so that the cost of bringing copper from the mine to market will drop from a low 47 cents to an even lower 41 cents by Q4 2007.

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