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The Western Union Company Message Board

  • wellsliq wellsliq Mar 27, 2013 2:48 PM Flag

    I don't get it - Peltier at the Street says this baby is no go. What does he eat for breakfast?

    It seems there is some sort of gamesmanship going on here. Western Union is intrenched all over the world with revenues gaining. So, watts up with this guy?

    What Visa does is an inverse relationship to what is happening with Western Union. They are diametrically opposed companies. The route answer is the sum of the digital parts. In other words, BUY - not bye, bye.

    Cash is King.

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    • redheadinvestor Mar 27, 2013 4:44 PM Flag

      I watched the video. This is a classic "do your own DD" moment. First, Peltier only has a sound-bite length of time. Second, he is "in a way" right that there is "no catalyst" if you take that to mean "the Street thinks this ticker sucks." Missing is the buyback as a slow-burn catalyst (probably because the video is called Dividend Corner).

      WU is giving vast cash to shareholders. Only part of it is dividend, the rest is buyback. Because most buybacks are total bullplop, are just posturing, any buyback tends to be ignored: 95% of the time, ignoring a buyback is correct. (For an example of a buyback as a waste of money, see XOM). The difference is that this is a 5% situation: WU actually executes the buyback, really is trading at prices where a back-up-the-truck buyback makes sense (is the optimal use of capital with a huge ROI), generates tons of cash on a zero-length cycle, and doesn't need much cash to operate.

      Few companies can match the FCF dynamic of WU. To discount it, you'd have to believe the operating model is toast. Dividend Corner doesn't go there, but Street analysts clearly think so. They're hugely wrong. I won't get into why they're wrong, it's a combination of reasons including contempt for the unsexy customer base and the idiot-default argument that GOOG, AAPL, EBAY, FB, and AMZN will split the whole universe. This combination of huge misundersandings by guys paid to know better is why WU is a screaming buy.

      The argument I just made is obvious if you dig enough to connect the dots, and it's obvious enough that a retail investor with sophomore-level understanding could grasp it. But if you're just glancing at a company and delivering a sound bite, or if you've given the DD assignment to a useless junior analyst, it's a case that could be missed. Keep missing it - I want more cheap shares of WU.

      • 1 Reply to redheadinvestor
      • redheadinvestor Mar 27, 2013 4:54 PM Flag

        Let me talk a bit more about digital risk. The Street is right that WU is not digital enough ("NDE"). But that can mean one of two things: 1) the Street view, that being NDE means WU can't change, is doomed, and is going to get killed by EBAY, V, XOOM, MGI (!) or whoever, or 2) the contrarian view, which is that payments space has vast growth potential, WU is already partly digital while being anchored in a key space, and digital is therefore an immense growth space for WU (oh, and WU is not doomed). I take the second view. I see no (or, at best, insignificant) hard evidence for the first view. My view has $1 B in FCF and a 12% yield-to-market-cap behind it.

        Curiously, opinion pieces (which are correct) about the huge opportunity to provide financial services to the unbanked global billions are a dime a dozen. What's funny is that WU is the leader in this space, and instead of recognizing that, everyone forgets WU and says something like "Maybe AAPL or GOOG or FB will find a way to serve these people." Um, no, they won't. The Street belief that these companies are magical and will simply dominate any space they choose to enter - that if GOOG decides to manufacture cars, F is dead, or that if AAPL decides to start an airline, LUV is out of business - is widespread, brainless, and totally wrong. I'm bearish on bulge bracket tech as a sector, which I think is rapidly commoditizing amid problematic value realization and sustainability. I think it's hard to beat WU for risk-adjusted cash-backed unappreciated return potential.

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