My colleague Gabe Marshank's big reveal tomorrow; Updates on Alphabet and Apple; Highlights from my presentation on Global Payments
1) Tomorrow, my friend and colleague Gabe Marshank is going on camera for an event that you won't want to miss...
Gabe is a 20-year veteran of elite hedge funds on Wall Street. He worked at Steve Cohen's SAC Capital, David Einhorn's Greenlight Capital, and Leon Cooperman's Omega Advisors.
While working for those funds, he also scored nine-figure market wins twice. (In one case, he helped Cohen buy the New York Mets.)
I've been working with Gabe over the past five years. And here at Stansberry, he has been operating behind the scenes to help find high-upside ideas. In short, Gabe has been a kind of "secret weapon" at our company.
In fact, he and the teams he has been a part of have identified at least 18 ideas that went on to soar by at least triple digits after they were recommended – one as high as 899%.
Tomorrow, he'll be going on camera to explain the details of his incredible strategy. Plus, he'll share an opportunity with 25-fold upside potential in front of a panel of heavyweights in our industry.
You won't want to miss Gabe's big reveal tomorrow – and it's free to attend. Get more details and register here.
2) In my presentation at the annual Stansberry Conference & Alliance Meeting in Las Vegas last week, I highlighted four of my favorite stocks...
In yesterday's e-mail, I shared the highlights on Joby Aviation (JOBY) and Match Group (MTCH). So let's take a look at the other two today...
First up is one that longtime readers will know well: tech giant Alphabet (GOOGL), which I've been bullish on for more than five years. (You can see the archive of past e-mails discussing it here.)
In my presentation last week, I was pleased to show that Alphabet has been the best performer among five of the "Magnificent Seven" stocks over roughly the past five years:
Note that I excluded Nvidia (NVDA) because it's a chipmaker and growth has been so extreme, as well as Tesla (TSLA) because it's in a totally different business.
And yet, despite the wonderful stock performance, Alphabet's forward price-to-earnings (P/E) multiple is the lowest of the five companies. Take a look at this next slide:
I also added this slide that shows why Apple (AAPL) is my least favorite of the tech giants – its stock has the highest P/E multiple, yet revenue and net income have stagnated for nearly five years:
3) My other stock idea is one that Stansberry's Investment Advisory subscribers heard about first: financial technology company Global Payments (GPN).
Back in June, my team and I recommended the stock in that month's Investment Advisory issue. Subscribers who followed our advice to buy are up 15% since then.
(Subscribers can access our full write-up and specific buy advice here. If you're not an Investment Advisory subscriber, you can learn how to become one – and find out how to gain access to all of our open recommendations – by clicking here.)
Global Payments is essentially a middleman in the credit-card network. And it's poised to be the largest merchant acquirer once it merges with another company called Worldpay. Here's the overview slide from my presentation:
Global Payments has been a fabulous grower. Take a look at the steady growth in revenue and operating income:
The company also generates gobs of free cash flow ("FCF"). Here's a chart of FCF, cash from operations, and capital expenditures ("capex"):
Regular readers know that one of my favorite sayings is that, over time, "stocks follow earnings" almost always.
So, looking at these two charts and knowing what monster winners some of the stocks on the first slide have been, like JPMorgan Chase (JPM), Visa (V), and Mastercard (MA) – all of which are withing a smidge of their all-time highs – you would probably figure that Global Payments was soaring as well.
But you would be wrong. Take a look at the 10-year performance chart below...
As you can see, Global Payments outperformed the S&P 500 Index for many years. But since early 2021, its stock has crashed by roughly 60%. And now, Global Payments is underperforming the S&P 500:
As a result, Global Payments' forward P/E multiple is close to an all-time low:
There are a number of reasons why investors have soured on GPN. Here are the quick bullet points from my presentation:
- Negative reaction to Worldpay acquisition – both price ($24.25 billion) and use of stock.
- Rising debt, due to $4 billion acquisition of EVO in 2023 (GPN currently has $16.7 billion of debt ($14.1 billion net of cash), equal to 3.7x total debt/[earnings before interest, taxes, depreciation, and amortization ("EBITDA")].
- Under-indexed to e-commerce growth.
- Rising competition in small- and medium-business channel by new point-of-sale ("POS") solutions such as Toast, Clover, and Square.
- Growth in software-led and [payment facilitator] business models threatening legacy merchant acquiror economics.
- Execution risk with the deployment of new POS solution, ongoing sales force reorganization, and integrating Worldpay.
But I think investors are missing the big picture... and as such, the sell-off is wildly overdone.
At yesterday's closing price of $86.79 per share, the company has a market cap of about $21 billion plus roughly $14 billion of net debt. And consensus analysts' estimates are for $13.65 per share in earnings next year. That puts Global Payments' forward P/E at a miniscule 6.4 times.
This is crazy. I can't recall ever seeing a stock so disconnected (to the downside) from its fundamentals.
GPN has incredible margins – among the highest in the payments industry. Take a look at this table from that Investment Advisory write-up:
And once Global Payments closes on the Worldpay acquisition (early next year) and becomes the largest merchant acquiror, economies of scale should boost the company's EBITDA margin even higher.
Meanwhile, activist investor Elliott Management and two private equity firms – GTCR and Silverlake – have significant investments in Global Payments. So they have "skin in the game" to want to see the company's go higher.
And Global Payments has committed to repurchase one-third of its market cap over the next 10 quarters.
In my view, a business of this quality should trade at a minimum of 20 times forward earnings. (Global Payments' historical average is about 18.7 times.)
Expected earnings this year are $12.21 per share. Multiplied by 20, that equals about $244... which is almost triple the current share price of $86.79. (Looking ahead, next year's expected earnings are $13.65 per share. When we multiply that figure by 20, we get $273.)
Again, Investment Advisory subscribers heard about it first – they can see our full report with specific buy advice on Global Payments here. And if you aren't a subscriber, learn how to gain access to it – and the entire portfolio of open recommendations – right here.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.