“How the Government’s War on Cash Could Make You Rich”

Larry Edelson's says we can cash in on the "Digital Payments Gold Rush"

By Travis Johnson, Stock Gumshoe, March 17, 2016

Today we’re looking at a teaser pitch from Larry Edelson, who thinks that the government is on the verge of outlawing cash and forcing you to use credit cards and other digital payments.

And, of course, he has a way to enrich you as this trend proceeds… buying the companies who are doing the payment processing and otherwise are involved in “digital cash.” And no, it’s not a wonky bitcoin pitch, these are all real, fairly sizable mainstream companies who process credit cards and do other “normal” stuff. All you have to do to get started on these riches, we’re told, is subscribe to his Real Wealth Report ($159)… or, of course, you can read on and we’ll try to name all the stocks for you and get you started on thinking for yourself for the somewhat more palatable price of “zilch.”

(I’d be remiss if I failed to note that if you DO want to pay for more, faster, better, perhaps thinkier stuff, even if we can’t promise to make you rich… well, we’d love to have you as one of our Irregulars if you’re not already a paying member. A bargain at $49 a year!)

Here’s a bit of Edelson’s spiel:

“I’d like to tell you about an investment opportunity that is simply too good to pass up …

“… a chance to potentially double, maybe even TRIPLE your money in the coming months …

“… all while helping to keep your financial affairs secure from the prying eyes of government snoops, Internet thieves and scammers.

“This rare, once-in-a-lifetime opportunity is only possible because western governments, the world’s biggest banks and Internet billionaires are all doing their level best to eliminate cash from the global economy …

“… and FORCE all business transactions to be conducted electronically with bank debit cards, Paypal, Google Wallet, Apple Pay, and other electronic payment systems.”

And it’s not all about one single company or technology, he’s got a whole “dossier” of stocks who have already generated profits in this area in the past, and apparently he thinks they will be good bets going forward. More from the ad:

“These are companies that I believe will profit most from the War on Cash — and which will also help you do your part to fight back against this unconstitutional invasion of your privacy.

“The title of this report says it all: The War on Cash: How to Fight Back and Cash in on the $15 Trillion Digital Payment Gold Rush.

“This privately printed dossier is chock full of details on the best opportunities right now — red-hot investments that I believe could easily DOUBLE your money in a matter of months … and potentially make you a fortune over the next several years.”

And, of course, it’s top secret…

“In fact, I fully expect that the information I want to send you will soon be classified ‘Top Secret’ by the U.S. government — and perhaps even banned for dissemination under the pretext of ‘national security.'”

Oh, brother.

Alright, he’s hinting at a huge number of stocks as plays on this “war on cash,” so I don’t have time to pick on the hyperbole for long… let’s just jump right in to identifying the stocks. Ladies and Gentlemen, your clues!

“Stock A: It’s an up-and-coming mobile payment and privacy company, based in Cincinnati, with annual revenues of $2.5 billion.

“This company’s stock price shot up from $19.52 a share in November 2012 to $52.59 a share just three years later.

“That represents a total return of 169.4% — or an average return of about 39.15% per year.”

Edelson also included a chart in his “turn $10,000 into $269,245 in a decade!” pitch about this one, so we can confirm that the Thinkolator is right on the ball in saying this is… Vantiv (VNTV), which is indeed a payments processing company based in Cincinnati… though their annual revenues have been growing, so the trailing number is now a little over $3 billion ($2.5 billion would have been accurate a year ago).

Vantiv came into being as a separate company in 2012 when it was spun out of Fifth Third, the big regional bank based in Cincinnati. It’s a fairly large firm, market cap around $9 billion (plus around $4 billion in debt), and as of the December data in Yahoo Finance, Fifth Third still owns close to 20% of the shares. This is a growth stock, and it has been growing — priced at about 20 times 2016’s expected earnings and with growth over the next few years expected to be in the 10-16% range. They are an integrated payments processor, most of their business is providing card processing services (and add-ons like security) to merchants, and they have a smaller business providing mostly card-related services to banks. You can see their latest investor presentation here for an overview of the business.

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Next!

“Stock B.

“It’s another digital payment processor that has seen staggering growth in the last few years.

“Stock B’s shares were selling for just $20 in 2012 but have since done a moon shot as digital payment revolution gathers steam worldwide.

“Recently, Stock B has been selling for around $65 a share — which represents a total return of 225% over the past three years.

“That’s roughly 8 times more than the S&P 500 has returned in the same period.”

This one is not so certain, but the best match the Thinkolator has found so far is Fidelity Information Services (FIS), which has a similar but not exactly identical chart and did return roughly 200% from the 2012 low to the 2015 high, and is priced in the mid $60s ($63 right now). Fiserv (FISV) is also fairly close to being a match, as is Euronet Worldwide (EEFT) or Heartland Payments (HPY), and all of those are fairly similar businesses, but neither is as close as FIS. Perhaps there’s a more compelling one that I haven’t yet run across.

“Another mobile payment processor, Stock C, also has seen similar gains that have left the overall market in the dust.

“It sold for around $14 a share in 2010 but has been climbing steadily ever since.

“It hit its recent high in late 2015 at $52 a share — an annual return of 30% a year for five years running.”

The best match here, per the Thinkolator, is Total System Services (TSS), which, yes, is a payment processor. They’ve come sharply off of their mid-$50s highs in December, dipping briefly below $40 in the February slump and now sitting at about $45. They grew pretty quickly in 2015 (earnings growth of about 25%), but are projecting much lower growth in 2016 (in their year end presentation they projected about $2.60 in earnings for 2016, which is growth in the 5% range), so perhaps that’s why the stock fell so sharply during the market swoon. Don’t really know much else about them, most of these payment processors seem to do mostly the same things (recruit merchants, provide back end services for payments, sell equipment and add-on services, etc.). It’s trading at about 17X current year earnings expectations, and is expected to grow earnings “in the high single digits,” so it’s fairly richly valued compared to the market but is actually a bit cheaper than most of the other payment processors I’ve been looking at… mostly, I think, because the growth expectations are lower.

You’ll also see the company call itself TSYS, but that is not the ticker (TSYS is their subsidiary that acquires merchants, it appears). They’re also in the process of acquiring Transfirst, another payment processing company, and that same presentation details the reasons for (and the potential profitability of) that merger.

“Imagine making 12 times your investment in just 2 years!

“And then there’s Stock D.

“Stock D went from $4 a share in 2009 to $54 in about two years — for a total return of 1,250%.

“A $10,000 investment in this digital payment stock would have netted you a tidy $125,000, again in about two years.”

OK, so that’s a ridiculous tantalizer… why does it help us to know about a stock that provided 1,250% returns from 2009 to 2011? This one is very likely Verifone (PAY), which has been an oft-cited “cashless society” stock over the years because of their strong presence in payment terminals (you’ll probably notice that your grocery store or your McDonald’s has a Verifone machine for your card-swiping pleasure), but it has also been extraordinarily volatile — the stock did go from $4 or so at the 2008/2009 lows to the mid $50s at the spring 2011 (and 2012) highs, but in the years since then it’s seen the mid teens and the high-$30s. The shares are now at about $28, and they just reported a good quarter and raised forecasts last week so the valuation looks pretty nice — trading at about 11X expected 2016 earnings, with expected earnings growth of about 15% for both this year and next year. You can see the transcript of their call here if you want to get an idea of where the business stands.

Another?

“Stock E.

“In 2010, the stock didn