The “end of cash” story has been around for a long time, and it has fueled several waves of investment teaser ads over the past decade or so… which led me to wonder whether DeHaemer is pitching anything new or different in the ads for his Bull and Bust Report (currently $99/yr).
So let’s dig in and check it out, shall we? The big picture notion that “cash is dying” is not a shock or surprise, of course, we’ve all noticed that we use less cash and see card terminals in more places, but here’s a little taste of the ad to get you started:
“Don’t be surprised to find that in less than five years, money as you know it will be a thing of the past.
“Millions of Americans like you and me will be carrying just one thing: their mobile phones.
“And you know the four MVPs I mentioned earlier?
“They are the SAME companies set to dominate this massive $100 trillion industry — at home and abroad.
“Think of this as your one and only chance to get positioned in the ‘Next FAANG…’
“Before the stocks go absolutely ballistic.
“Like grabbing a slice of Apple before it shot up by 1,600%…
“Amazon before it skyrocketed by 3,100%…Are you getting our free Daily Update
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“Or Netflix before it zoomed up by 5,700%.
“Here’s a surprise, though…
“You won’t find a single one of the ‘Usual Suspects’ on my exclusive list of top buys today.”
So how is it that these companies are making money on the “death of cash?” More from DeHaemer:
“Behind the scenes, my four MVP companies had designed an ingenious system to siphon off profits from practically every digital transaction made around the world.
“The ‘New FAANG’ companies are busy cornering a $100 TRILLION market for themselves.
“Even if they were to mop up a tiny one-quarter of 1% of this gargantuan amount…
“Which is very possible…
“That’s $250 billion straight into their pockets.”
That’s essentially what every payment network and payment processing company does — they charge fees that amount to a fraction of a percent of the transaction. No surprise there.
And we’re told that these “MVPs” are going to shoot higher soon, because they’ve identified a “catalyst” that will spark the stocks….
“SPECIAL ALERT: The New MVPs are about to get another unexpected boost by February 29, 2020.
“That’s when I expect Facebook’s much-hyped Libra project to be dead in the water. …
“Libra’s days are numbered. I expect it to go down in flames no later than February 29, 2020.
“Once it does, that will add even more fuel to the prices of our “New FAANG” stocks. Why? Because there will be one less competitor to split up to $100 trillion in revenue with!”
I can’t say that I ever took Libra very seriously, frankly, but it is still not quite dead yet — they have been losing partners, presumably both because this facebook blockchain money transfer project has been a lightning rod for regulatory criticism and because it hasn’t really moved forward beyond the “concept” stage. I don’t think there was ever a huge risk that Facebook would earn a big portion of the digital payments business, but it is still possible (payment systems and networks have evolved differently in different markets, and the “FAANGs of China”, particularly Tencent and Alibaba, dominate digital payments in that country).
And this is basically a “marketing overpromise:”
“To everyone’s surprise, the old FAANGs have handed control of the lucrative payments opportunity to a new supergroup called the MVPs.
“I expect their share prices to go ballistic on or around February 29…
When Facebook’s Libra venture goes belly-up.”
Thankfully for the lawyers, “ballistic” does not have a precise definition, and “on or around” could also mean, well, anyyhing. There’s a reason why ads lack precision on these points, even when they try to give you the idea that they know exactly what the future will hold… and that it holds imminent wealth.
So what are these “MVPs” teased in the Bull and Bust Report ad? Well, they aren’t the “usual suspects” in that they aren’t FAANG companies… but they are certainly the “usual suspects” for anyone who’s been involved in or researching the digital payments space over the past five years.
Which means you’ll probably be a little disappointed to hear the Thinkolator’s results: DeHaemer’s MVPs are, in the order of the acronym, Mastercard (MA), Visa (V), Paypal (PYPL) and Square (SQ).
Not a tiny upstart or unknown company in the bunch, right? Also, sadly, not a company that I own (though I’ve owned a couple of them in the past), because they’ve all been extraordinary performers.
They aren’t small companies anymore, nor are they cheap by any rational assessment (though truly, not many companies that have any kind of growth are cheap right now) — Mastercard is now a $328 billion company, still the little brother to Visa’s $463 billion, and even upstart PayPal is at $136 billion as they get close to the five-year anniversary of their split with eBay. Only Square could really even be called a “midcap,” with a market cap of about $30 billion.
But yes, they are dominant — or at least, the big guys are. The days of any kind of real opening to disrupt Mastercard and Visa appear to be long past now, the revolution of “tap and pay” and paying with your cell phones still works almost entirely because it connects to those legacy Mastercard and Visa payment networks that incorporate essentially every merchant and bank in the world.
Here’s what those four stocks have done in the 4+ years since Square went public (which wasn’t long after PayPal separated from eBay):
And in case you’re curious, that’s generally a little better than the performance we saw from the FAANG stocks over that same time period, on average…
MA and V are each roughly 1% of the S&P 500, which means they’re among the dozen or so largest companies in the world… so the only ones that are really substantially larger are, in fact, the FAANG stocks (OK, fine, and JP Morgan and Berkshire Hathaway and Microsoft and one or two others).
It’s hard to argue with at least the big three of this group — Square is in a more competitive situation and is less established, and that’s reflected in the volatility of the stock, but it is a strong emerging brand for retailers.
But it’s also hard to argue that Mastercard or Visa are particularly undervalued — they carry FAANG-like valuations and profit margins (50% profit margins, 13-15% revenue growth), and they could certainly keep chugging along, but they’re not surprise stocks that are likely to double on a piece of exciting news… they’re among the most widely-owned and widely-followed stocks in the world, and they trade at roughly 30-35X forward earnings.
These are all strong companies, for sure, but if I were picking just one I’d likely land on PayPal as being in somewhat of the “sweet spot” — they have a dominant position in online payments and a very trusted brand, right up there with Visa and Mastercard, and they’re also growing substantially faster (20%+ instead of 14%) and they trade at a very similar valuation to their larger partners and competitors.
That’s just my take, though, and these are all companies that you probably have some personal exposure to when you shop… and are certainly stocks you can research quite thoroughly on your own. I expect the trends driving them forward will remain quite robust, but it’s also true that at 30X forward earnings you’re already making the assumption that those trends will continue and that any disruption from outside events or new players (like blockchain) will either be minimal or will absorbed by the goliaths (it is, after all, awfully hard to sneak up on a $400 billion business and steal their bread and butter… Visa and Mastercard are not going to be “surprised” by any of the hundreds of blockchain-based payment system hopefuls).
What matters for your money, though, is what you think — do you believe that the “MVPs” will continue to have a run that reminds you of the huge investment success that the FAANGs have been over the past decade? Let us know with a comment below.
Disclosure: I own shares and/or call options on Berkshire Hathaway, Alphabet, Amazon, Facebook and Apple among the companies mentioned above. I will not trade in any covered name for at least three days, per Stock Gumshoe’s trading rules.