The latest ads from Cabot’s Global Stocks Explorer caught my eye with a “bypass the coronavirus” pitch. Here’s how the ad starts:
“Bypass the Coronavirus…with this hidden gem at the heart of ‘the biggest investment boom in history’
“Operating revenue increased over 70%.
“Gross profit surged 122%.
“Net income was up over 60%.
“Total bookings increased more than 150%.
“Total number of registered users was up 92%.
“No sales guys”
That sounds pretty good, right? So what’s being touted here by Cal Delfeld for his Global Stocks Explorer newsletter? Here’s some more of the lead-in that grabs our attention:
“Tapping into my intelligence network, I have found a company and stock that I have no doubt is the infrastructure play of the decade.
“This is no steel or construction company but rather is a leader in a special type of infrastructure, requiring much less capital and offering much more explosive growth than traditional infrastructure.
“This type of infrastructure is hardly mentioned by the financial media.
“Instead of cement or muscle, it requires brainpower.
“Instead of taking years to build, it moves at lightning speeds.
“Instead of steady, predictable returns for income investors, it is delivering real wealth.”
The ad highlights the importance of infrastructure in general, suggesting some traditional infrastructure investments like Brookfield Infrastructure Partners (BIP), Fluor (FLR) and Nucor (NUE), but the fun part is when he talks up the “modern” infrastructure that he thinks is much more exciting…
“Boom Trend #3: FINTECH
“The Rise of Mobile Payments & Digital Financial Infrastructure….
“Because of the explosive leapfrog growth of cell phones, the rising young consumer middle class, and a willingness to bypass traditional credit cards and bricks and mortar banks, mobile payments and digital banking are soaring.
“One company I call the ‘Giant’ – stands tall in Asia. This company is private and not listed on U.S. markets but I will shortly explain to you how to invest in its growth.
“I’ll also explain how you can learn about a smaller company that is growing even faster and will likely be acquired by this giant.”
So it looks like we’ve got two different companies being hinted at here… this is what he says about the big one:
“… the giant has gotten even bigger with 900 million Chinese and about 300 million overseas customers using its payment platform. And its goal is a staggering 2 billion by 2030.
“The company’s value has gone from $50 billion in 2015 to $150 billion in 2020.
“The company is also starting to make loans to individuals and to small businesses, and it has set aside $1 billion to expand in India and Southeast Asia – a potential combined market of 2 billion alone.”
That’s almost certainly the company that is (arguably) the most powerful fintech company in the world right now, Ant Financial… which was spun out of Alibaba (BABA) about five years ago, is believed to be worth about $150 billion these days, and remains part of the “Alibaba community” of companies and fuels most of the transactions on Alibaba’s giant marketplace platforms. More than 90% of online financial transactions in China are reportedly handled by either Ant Financial and Alipay, or by Tencent’s WeChat WePay service. You can, of course, buy either Alibaba or Tencent if you wish to have exposure to almost anything internet-related in China, but those are also massive companies (each over a $500 billion market cap) so they aren’t exactly “pure play” investments on any one specific trend like fintech and electronic payments.
The spinoff of what was then called AliPay in 2004 and 2005, as Alibaba was going public, was handled in a strange way and may have resulted in Jack Ma owning much of Alipay and then selling it back to Alibaba in some way (honestly, I can’t figure out the chain of events, and it doesn’t seem worth the effort at this point), but Alibaba is reportedly now again a one-third owner of Ant Financial, which itself might have an IPO at some point… so yes, buying stock in Alibaba is probably the cleanest way to invest indirectly in Ant Financial’s growth if you’re interested, and I’d wager that’s what Delfeld is recommending here.
But the smaller one is a little more interesting, whether or not it ever gets acquired by Alibaba or Ant Financial… here are the clues we get about that one, similar to what he mentioned at the top of the article but now (helpfully) a little more specific:
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“This smaller company has most recently posted some eye-popping numbers:
✓ Operating revenue increased 76%.
✓ Gross profit surged 122%.
✓ Net income was up 62%.
✓ Loans outstanding are over $7 billion – double that of a year ago.
✓ Total loan bookings increased 170%.
✓ Total number of registered users reached 62 million – up 92%”
And we get some other specifics, too:
“The company’s target market is 250 million educated young adults aged between 18 and 36 with high income potential, high educational background, high consumption needs, and a strong desire to build their credit profile.
“And because it begins serving them early in their career, they have a clear advantage in data and analysis. In fact, this company gets to these Chinese yuppies years ahead of the banks by about five years.”
And apparently the valuation is pretty compelling…
“Despite these stellar numbers, this stock sells for 14 times trailing earnings and between 5-6 times prospective earnings. Earnings could increase by as much as 40%-50% in 2020.”
So who is it? Well, we’ve got lots of pandemic projects going on here at Gumshoe Manor, so I had to scooch the skid steer aside and climb over a pile of mulch to get to it, but the Thinkolator did fire right up on the first pull… and after feeding in a few shovels of those hints I did get our answer: This tease is pointing right at LexinFintech (LX).