Valuation Metrics For Select
Payment Application & Infrastructure Software Companies
LOTM is finding short-term (three to seven business days) trading opportunities in this area – too short-term to announce as they are often am instinctive reaction. However, we feel this is the bottoming “stage one phase” of the chart forming. We are also positioning the three companies indicated by * as longer-term position. Possibly one to three years with a goal of a double to triple from the current price. This is a highly competitive industry, but it is also highly geographic on a global scale as well. If a large company like Square or PayPal wants to be in Brazil for example, its easiest path is to buy a company like StoneCo or PagSerguro.
Brazilian stocks have had a very difficult year in general so in this regard Brazil is front running stocks in the USA. Brazil’s inflation rate has been higher than the USA until recently and they have already begun raising interest rates.
Chart Below:
One year chart of The Brazilian market in blue Comped to the NASDAQ in green The NASDAQ is up 20% and the Brazilian market is down about 10% over the last year.
NOTE: 40% of the NASDAQ stocks are down about 40% in the last twelve months. The Index is up 20% primarily because the largest companies in the NASDAQ influencing the indexes. As is the normal course of action, the truth lies below the surface. To succeed at this stock market game, you must dig deeper than what the general financial media tells you.
It is too soon to tell but Brazil’s market has stabilized a bit in the past couple of weeks. The is a developing theme, that money will be better rewarded in Emerging Markets than in the US Stock Market. LOTM is looking at emerging market names. We have always liked the high recurring revenue nature of the payments industry but have typically felt the valuations were higher than what we wanted to pay. This is an opportunity to buy into this industry when out of favor.
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* An account related to LOTM holds a position in this security.
Neither LOTM nor Tom Linzmeier is a Registered Investment Advisor.
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Feliz Navidad Tom!!!