Western Union Co. (WU)

It was in a downtrend, but for the past 12 months has been bottoming out between $8-10. Is creeping up a little, which is encouraging. It needs to take out the previous high of $9.50 or $10 to indicate it is turning around. The chart looks encouraging.

It lacks the earnings power to drive shares higher.

One reason he chose this is because of the dividend (as a Canadian, best to hold in an RRSP). Stock's really cheap at ~5x PE. Analysts are forecasting ROE of 43%. 

There are concerns about it, or the stock wouldn't be down where it is. One of those concerns is that AI companies will cut its grass ;) and reduce profitability. That overlooks the fact that WU is also using AI. As long as it holds in here, upside potential is 200%. Yield is 10.45%.

Concern is always about new technology. Some complaints about prices it charges. Hasn't studied it recently. Yield is enticing, but could be a red flag. Need to look at debt and coverage of that dividend.

It's like owning a bond with an 11% yield. Tune out the political noise and focus on the steadiness of the earnings and dividends.

It reported this week. It pays almost a 7% dividend. Covid crushed cross-border money transfers and are facing serious competition from cryptos. WU has brought in a new CEO and sold off business. Also, they're moving into digital banking services and using their huge network of stores to give them an edge. Shares are up 26% in the past year. They target 2% revenue growth by 2025 and around 5% earnings growth. Modest, but numbers are not shrinking anymore. They just reported their 5th straight solid/good quarter. 2024 will be an up year and he expects shares to grind higher. The balance sheet is fine. You can buy it here, but he's not excited by it like AmEx.

He would avoid this. It is a stock that always looks cheap and attractive from a near term financial point of view, but his concern is on longer-term risks on money transfers. A very difficult, long term business with all of the new technology.

Generates a lot of free cash flow. A growing dividend and a low PE. This is a money transfer business, and Wal-Mart (WMT-N) is offering money transfers in their stores, but there is really no comparison. Very attractive, but not his favourite idea.

(A Top Pick March 27/13. Up 14.34%.) A global leader in the money transfer business. Sold his holdings in October. A good business still going forward and a little bit undervalued at these levels. Raised their dividend this year by 20%.

Always has cheap valuations because people compare it to a buggy whip manufacturer and that it will be obliterated by new forms of technology. Their clients are a great number of people who do not have banking services so there will always be a need for this company. Feels there is some value in this one.

(A Top Pick March 27/13. Up 4.76%.)

A global franchise which allows you to send money. Typically it is often used by new citizens in a country where they want to mail money back home. An intriguing story because it has a relatively low multiple and a high free cash flow but has proven to be a difficult place to be as a stock. He is concerned with the sustainability of its margins. When they lowered their earnings guidance last fall, and missed their earnings by a small amount, the stock dropped 30%. That risk profile is too high for him.

Massive free cash flow generator and a global leader in money transfer services. Had a big earnings miss in November and the stock dropped. Inexpensive at only 9X earnings. Dividend yield of 3.4% that should be increased every year. Buying back stock.

Taking a hard look at this. On his radar screens. Took a sickening fall a few months ago when they said they were charging way too much for the money transfers and were losing market share. Now they are right in line with the competitors. A lot of competition, which is the big risk. Valuation is cheap. Nice dividend. Wouldn’t be too concerned about the balance sheet because they don’t need a lot of cash to run the business.

(A Top Pick Sept 7/11. Down 17.48%.) A great way to move money around globally. Had a disappointing quarter. Still happy with their current operations and he is adding to their position.