THE BEST HIDDEN VALUE PLAY RIGHT NOW
The best hidden value play right now is Western Union - WU. Right now, its running silent and deep. No one sees how it is slowly bubbling higher. I am very confident that this will be over 30 within months.
Since its a new IPO, they dont have any of the options backdating scandals that you might find with an older organization. The first conference call was a smash hit out of the park. All of the analysts after the call, like Bear Stearns and Goldman Sachs, have rated this a strong buy. Barons, Morningstar and a few others are constantly pumping it. The P/E is very reasonable at 19. The Russell 3000 index P/E is in the 15-16 for comparison's sake.
However, you dont hear much about Western Union in the media. It doesnt have an exciting name and it doesnt involve tech. You have to ask yourself one question though. Will more foreigners try to come to America? Will they wire cash out to their family? This is a no brainer.
If you have been anywhere in the world, you will notice that a lot of women approach you right when you get off the plane at the airport. Dont even try to walk down a street or in a mall, there will be hundreds of women mobbing you. They want to come here to America and then wire the cash back to their family. There are Western Union outfits all over the Philippines.
Western Union is a great play. However, buying it over 30 is too late. Its cheap in the low 20s and it will keep bubbling slowly and silently higher. It probably wont make CNBC or the Cramer show until it touches 30. When it does, then that will be the time to sell.
Here is a key statement from the most recent 10-Q:
"Beginning in the second quarter 2006, Western Union's business was adversely impacted by the immigration debate and related activities in the United States. This controversy around the subject of immigration and the changes in the approach of various government entities to the regulation of businesses that employ or sell to immigrants has created fear and distrust among many Hispanic consumers in the United States. As a result, the frequency of money transfer transactions involving these consumers has decreased and competitors have lowered prices and foreign exchange spreads in certain markets. Collectively, these issues adversely affected our Mexico and United States domestic businesses through the third quarter of this year, and we expect these issues to continue to impact our businesses in the future. Certain actions taken by the State of Arizona with respect to money transfer service providers have added to the uncertainty of our consumers. For more discussion on this matter, refer to the consumer-to-consumer segment discussion below."
Now that our legislative system will be in gridlock and the immigration debate is slowly fading into the woodwork, Western Union wont be at the current price per share for long.
When I walk around New York City on a daily basis, I conclude that a lot of these people on the streets are probably not American citizens and just got here. I have no problem with that so long as they use Western Union and they will.
In third world countries there is a convenience store on the corner. This place is broken down, dirty and ugly. There is a yellow sign on the corner of that store saying "Western Union". Even in Iraq with all the car bombs going off, that little yellow sign is still standing.
If I want to send money to someone in Baghdad, the Falkland Islands, Thailand, Bosnia, Lebanon or any other random country, then the place to send it is Western Union. Its a highly trusted and recognized name.
This is a business model I understand and a clear value play where the price is being dogged down by the immigration debate. As the debate fades into the woodword, I want you to go outside to one of those guys riding around the bikes in NYC delivering food. Ask them how they send their money home. They will point to the convenience store on the corner with the yellow sign, Western Union.
The best hidden value play right now is Western Union - WU. Right now, its running silent and deep. No one sees how it is slowly bubbling higher. I am very confident that this will be over 30 within months.
Since its a new IPO, they dont have any of the options backdating scandals that you might find with an older organization. The first conference call was a smash hit out of the park. All of the analysts after the call, like Bear Stearns and Goldman Sachs, have rated this a strong buy. Barons, Morningstar and a few others are constantly pumping it. The P/E is very reasonable at 19. The Russell 3000 index P/E is in the 15-16 for comparison's sake.
However, you dont hear much about Western Union in the media. It doesnt have an exciting name and it doesnt involve tech. You have to ask yourself one question though. Will more foreigners try to come to America? Will they wire cash out to their family? This is a no brainer.
If you have been anywhere in the world, you will notice that a lot of women approach you right when you get off the plane at the airport. Dont even try to walk down a street or in a mall, there will be hundreds of women mobbing you. They want to come here to America and then wire the cash back to their family. There are Western Union outfits all over the Philippines.
Western Union is a great play. However, buying it over 30 is too late. Its cheap in the low 20s and it will keep bubbling slowly and silently higher. It probably wont make CNBC or the Cramer show until it touches 30. When it does, then that will be the time to sell.
Here is a key statement from the most recent 10-Q:
"Beginning in the second quarter 2006, Western Union's business was adversely impacted by the immigration debate and related activities in the United States. This controversy around the subject of immigration and the changes in the approach of various government entities to the regulation of businesses that employ or sell to immigrants has created fear and distrust among many Hispanic consumers in the United States. As a result, the frequency of money transfer transactions involving these consumers has decreased and competitors have lowered prices and foreign exchange spreads in certain markets. Collectively, these issues adversely affected our Mexico and United States domestic businesses through the third quarter of this year, and we expect these issues to continue to impact our businesses in the future. Certain actions taken by the State of Arizona with respect to money transfer service providers have added to the uncertainty of our consumers. For more discussion on this matter, refer to the consumer-to-consumer segment discussion below."
Now that our legislative system will be in gridlock and the immigration debate is slowly fading into the woodwork, Western Union wont be at the current price per share for long.
When I walk around New York City on a daily basis, I conclude that a lot of these people on the streets are probably not American citizens and just got here. I have no problem with that so long as they use Western Union and they will.
In third world countries there is a convenience store on the corner. This place is broken down, dirty and ugly. There is a yellow sign on the corner of that store saying "Western Union". Even in Iraq with all the car bombs going off, that little yellow sign is still standing.
If I want to send money to someone in Baghdad, the Falkland Islands, Thailand, Bosnia, Lebanon or any other random country, then the place to send it is Western Union. Its a highly trusted and recognized name.
This is a business model I understand and a clear value play where the price is being dogged down by the immigration debate. As the debate fades into the woodword, I want you to go outside to one of those guys riding around the bikes in NYC delivering food. Ask them how they send their money home. They will point to the convenience store on the corner with the yellow sign, Western Union.
