One of the companies that I expected to show up in Berkshire's portfolio by now is Western Union given that Todd Combs owned it when running his hedge fund and was one of his "favorite stocks" according to one of his investor letters. I've followed Western Union since the time Combs was hired at Berkshire and never got comfortable with the durability of the company's moat. Apparently the market did not like yesterday's earnings report because the stock is down 27% today. Market cap is about $8 billion. Will Combs make a move here or did his assessment of the company's moat change over the past couple of years? Interesting to think about...
I'm in this morning at $13.18, just a small position. This would seem to be a case where Mr. Market is throwing a temper tantrum because his expectations were not met; really, earnings weren't bad; the business isn't going away.
Link below is to an NYT article concerning WU. Many of its customers who send small amounts of money at frequent intervals are paying a very high percentage in fees. They resent this, and (if the article is to be believed) many perceive the service as predatory but continue to use WU for lack of a viable alternative. http://www.nytimes.com/2012/06/02/business/new-rules-for-mon... Such C2C transactions, 85% of which involve a transfer to a country outside the U.S., are by far the biggest part of WU's business (81%). Revenue from these transactions has been flattish and may decline next year. Electronic transfer and value storage are growing, but represent small parts of the business. There's likely to be a lot of competition here, but the market is potentially very large, and WU is the 800-pound gorilla. I'm of two minds regarding investing in a hated business. Nobody loves payday lenders, private student loan providers, car mechanics, or lawyers, but they persist and earn reasonable returns on capital (though often far less than you might expect a "predator" to achieve). Even Wells Fargo has received a fair degree of negative sentiment regarding their rates and fee structures. I looked at opening an account with WFC and was amazed how disadvantageous the terms were (I opted for the local credit union instead). But this hasn't prevented WFC from being a competitive business. However, if your customer is looking for an excuse to switch to a competitor, you had better make sure your service is sticky.
Many of its customers who send small amounts of money at frequent intervals are paying a very high percentage in fees. They resent this, and (if the article is to be believed) many perceive the service as predatory but continue to use WU for lack of a viable alternative. There are more viable alternatives emerging all the time which are often available at cheaper price points. Western Union strikes me as a well known and trusted brand, but not a "loved" brand like Coca Cola or McDonalds, etc... Customers use it because they perceive that doing so is the cheapest method to get funds to their relatives who may badly need the money and cannot afford any delays or the risk of fraud. Otherwise, I'm sure the typical immigrant sending funds via Western Union is cursing the company while sending the funds. I did some work comparing the pricing of Western Union to Xoom, MoneyGram, and PayPal a few months ago. In general, I found Western Union's pricing to be the most complicated primarily because the fee depends on where you are sending the money from and where it is going. Of course, Western Union has by far the largest network of agents so recipients benefit from the convenience. This "network effect", in my judgment, is the company's main competitive advantage over Xoom and MoneyGram. The real wildcard, however, isn't really competition for the traditional model of a migrant worker physically going somewhere to send funds and his relative going somewhere to pick up the funds. With the increasing penetration of cell phones in even the poorest countries, I'm not sure we are too far from the day when PayPal or similar services that cost very little or nothing begin to take significant share. Granted, most cell phones in the developing world are not "smart phones" but many cheap feature phones have internet capability and it is only a matter of time before smarter phones come down the cost curve and make it possible for the poor to access the internet. The trouble with PayPal is that the "unbanked" don't really have a way to use the service.... today. But if mobile wallets and electronic money becomes more widespread in the future, this could all change.I've been on the fence with Western Union for a long time but I need to take a look at it again in some detail to see if these concerns are adequately reflected in the lower price.
I would rather own a tobacco company than one of these money transfer companies, but let's leave the moral argument out of the discussion. As I know from trying to prevent my mother from using these people to send money to fraudsters in Jamaica, they charge about 14% of the first $100, and 4% of subsequent blocks of $100, not to mention the 3% they shave off when they convert currency. So a $200 transfer ends up costing you $18 + $6 in conversion losses, i.e. 12%, and obviously a higher % for smaller amounts.This is a perfectly legal service, but it is costly for the client, and begs to be replaced by something cheaper, like Paypal for instance. It is hard to see how WU and its competitors (principally Moneygram in N.A., I think) will be able to maintain such outrageous fees.Regards, DTM
Thanks for the input. This one definitely comes with some hair. It's an interesting question: how much value is there in a well-known but distinctly unloved brand at a time when the economics of the business are changing? Phones probably will change everything, but how fast? For now there's a lot of people internationally still without meaningful access to internet-based services. WU is already involved in partnering with local phone providers -- for example, with Etisalat, which I happen to know many Egyptians working in the Gulf States use to make remittances. Growing this part of the business can't happen fast enough, as far as I'm concerned, even if the margins are lower than in traditional storefront C2C business. Unfortunately, this is probably a situation in which good management is very important. I say unfortunately because WU management is one of the weaker aspects of the company.
Unfortunately, this is probably a situation in which good management is very important. I say unfortunately because WU management is one of the weaker aspects of the company. They certainly use lots of BS terminology in their earnings announcements. For example, they always use the term "pricing investments" to refer to discounting which I find annoying. On the other hand, if this is a declining business, the return of capital strategy they announced is a good move compared to other actions they could take. I think the best way to model Western Union is to assume a gradual decline in the existing high margin business over a certain period of time (5-10 years?) followed by an ongoing presence in a much lower margin business. I worry more about technology here than government regulation.
Stupid question - why don't they use the postal service and send international money orders?USPS MO for $1000 costs $4.45.
A nice article at the Economist lately on this industry.http://www.economist.com/node/21554740"The business of sending money across borders is lucrative, fast-growing and ripe for change"Western Union is the gorilla of money transfers, handling close to $1 in every $5 that is wired around the world. ...Even though they undercut the banks, money-transfer agents earn mouth-watering margins on remittances. Western Union's were above 28% in many of its biggest markets last year. Margins are so fat because pricing is far from transparent. Western Union, for instance, sets prices for individual customers depending on where they are and the amount they send. To wire $500 to Mexico from Dallas costs $14.To send the same amount from New York costs $25.Also some data at an older onehttp://www.economist.com/blogs/dailychart/2010/12/remittance... the cost was nearly 9% of a remittance of $200. Fees and exchange-rate margins make up the service-providers' charges. Banks are the most expensive, charging an average of 13% of the total amount. Post offices and money-transfer operators charge 9% and 7%, respectively. The cost of sending remittances is negatively correlated with the number of migrants and service-providers in a country; the more competition, the lower the cost. ...Jim
Stupid question - why don't they use the postal service and send international money orders?USPS MO for $1000 costs $4.45.Not a stupid question. I've sent money overseas that way. But not all countries will accept IMOs. It appears you can send one to Mexico but not Guatemala, Honduras but not Nicaragua. You can't send a U.S. IMO to Brazil, Indonesia, India, Egypt, South Africa, or Kenya. At least, that's what it looks like. I haven't tried. https://www.usps.com/shop/money-orders.htmOn the other hand, there are some specialized channels like Xoom and Remit2India which could prove a real threat to WUs dominance in certain markets. Rational, if you're willing to share any of the cost comparison data you mentioned earlier, that might be very helpful in getting a sense of a floor for WU's margins.
Stupid question - why don't they use the postal service and send international money orders?Simple: for the most country pairs, postal service isn't reliable, and can take weeks or months.The time, effort, difficulty, costs, and reliability of the process totry to confirm arrival and get a refund when it fails is much more than the cost of a wire transfer even when the fees are rich.For that matter, it's not particularly reliable for any country pair.Heck, the USPS doesn't know where Monaco is; more than once (really) they have sentflawlessly addressed mail to Uganda, who politely forwards it to me.Glass half full interpretation: the Ugandan post office seems to be on the ball.Jim(just booked a Western Union transfer on line a few minutes ago...)
Read through the cc transcript, reviewed the basic financials and decided to pass. Some very nice things in the past financial history including a really juicy NPM, but the cc was full of comments on new competition (both conventional and digital coming on a number of fronts). WU is doing much to fix this, but looks like the dam may be broken/the moat has been breached to me. A fair number of compliance issues as well.sw
but the cc was full of comments on new competition (both conventional and digital coming on a number of fronts). WU is doing much to fix this, but looks like the dam may be broken/the moat has been breached to me. A fair number of compliance issues as well.A look at the other side of the coin:The moat, I think has sprung a small leak or two, but is far from breached. I think this is probably a case of the future not having arrived yet, but the market reacting as if it had.Mobile phones seem to be a viable money transfer option. However, a lack of electronic payment infrastructure in developing countries limits its practicality. Even so, Western Union is well positioned for the challenges and potential such money transfers offer. Even if those on the receiving end were inclined to go the mobile phone route, unless there was an easy way for them to access their money as cash—which currently there isn't—they would be unlikely to adopt this approach. In developing countries there is a low merchant acceptance rate of electronic payments because these countries are predominantly cash-based. It seems reasonable to think that a trend in mobile phone money transfers would be gradual rather than abrupt. This gives Western Union time to position itself to adapt and benefit from the trend. Never the less, a wide adoption of mobile-to-mobile transfers, some time in the future, would help remove a barrier for competition because a physical agent and location would no longer be necessary. To cite an example of how the future hasn't yet arrived: Global Payments acquired a money transfer company, DolEx, in 2004. Having incorrectly seen the near future of money transfers as card based, not cash based, Global Payments sold DolEx after five years of subpar profitability. To approximately quote Morningstar: "Western Union's customers aren't late adopters, they are last adopters."There are two reasons why banks are unlikely to successfully poach Western Union's customer base: many people who use Western Union don't have bank accounts with which to either send and/or receive money. And, even if they did, money transfer fees charged by banks are generally higher than those charged by Western Union. Estimates suggest that about half of the world's population don't have bank accounts.Because of the advantage of size Western Union has been able to decrease its prices by a few percent a year. The average fee-rate has decreased by 15% over the last four years. In spite of this, the company has managed to slightly increase its customer-to-customer margins over the same period. Presumably, this strategy is designed to keep competition at bay as it would be less profitable to try to compete with Western Union and would likely entail a period of losses for new operators. This seems a smart move by management who are obviously very mindful of their business model's vulnerabilities. Theirs is a business that requires relatively little capital spending so would-be competitors don't need insurmountable amounts of cash to launch an attack.Western Union is the largest global operator, by far, with a revenue base about five times that of its closest rival MoneyGram. Size is key to competitive advantage in this industry as it provides the advantage of lower costs per transaction, somewhat of a network effect, and resources to strengthen the brand. Western Union has increased reported earnings per share every year—except one—over the last five years and aggressively started to raise the dividend in 2009.For what it's worth Morningstar is quite bullish on WU. They have assigned the stock a five star rating; meaning that they consider it significantly underpriced. They have a "Consider Buying" price on the stock of $ 20.30. They assign WU a "Fair Value" of $29. Additionally, they gives WU a "Wide Moat" rating, presumably because:[…]It is the largest money transfer company in the world, with almost 20% market share in international remittances, and one of only two companies with a truly global agent network, with MoneyGram being the other.All the same, they have acknowledged recently that Western Union's moat is weakening. Before the baby gets thrown out with the bath water its perhaps worth considering that WU is being valued as if it were a business with declining earnings. It isn't. Also, along with the earnings disappointment the company announced a dividend hike which, at present prices, represents a yield of over 4% with a relatively modest pay-out ratio to boot.kelbon
The move in price would appear to be an over reaction. The company has been on a path of gradually decreasing prices over the past number of years to keep up with competition. This is a continuation of that in a slightly more aggressive fashion.They are walking a bit of a tightrope. Drop prices enough so that customers don't flee but not so aggressively that you kill profitability. Although I would call managements presentation on the earnings calls average they have proven in their ability to manage this price/profitability balance quite well.I think the company is very attractive for a private owner at this level. Private equity firm of Berkshire like entity. With 1.1 bln in free cash flow they have quite a bit of debt paying capability and with BB leveraged loans trading around 5-6% (the company is single A right now) they could probably borrow 4-5 billion for about 250mm a year in interest expense. In better hands the Western Union brand might also be leveraged a bit better than it is currently.You have to love the buybacks and dividend. If they used the authorized buybacks and pay the current dividend they will be returning 14% of the current market cap to shareholders in the next 14 months. They can easily do this out of free cash flow and at the end of it we own the same company.
Kelbon -Some very good points worth further study.Was the Morningstar report put out prior to the latest Q report? I would guess so.It struck me from the cc that they are seeing multiple sources of new competition in multiple geographies.I do like the dividend increase. VL only gives them a B on Financial stregth, they have a fair amount of debt, cash flows are good.Will study further, but no position for now.sw
It struck me from the cc that they are seeing multiple sources of new competition in multiple geographies. I was annoyed that Ersek wouldn't speak plainly about this. But one thing we heard repeatedly. Question about market share? Answer: we have 500,000 locations. Question about promotions? Answer: we have 500,000 locations in 200 countries. Question about margins? Answer: we have 500,000 locations; 16,000 corridors in 200 countries. It was interesting to me that the competition wasn't all from digital channels, but from alternative C2C, cash services. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research DivisionJust a few follow-up questions. Just the first one, just the competitive pricing pressure. Is it coming from the usual suspects? Or is it from some of the newer digital players? I'm curious.Hikmet Ersek - Chief Executive Officer, President and DirectorIt's both. I would say that in parts of Russia, for instance, which we have told already, it's coming from new competitors, which it will take us about the next few months and the end of 2000, middle, I would say, second, third quarter of 2013, turnaround this business because we have the open retail here. But in some parts of the competitors, like in, with existing corridors, big corridors, key markets has been coming from existing corridors. It's a mix of parts. Parts of it also is digital, although we are growing the digital very fast in the higher principals, Tien-Tsin, like 5,000 plus principal has been a big growth in this area, and it -- we are very small here. And the lower principal a month, on the remittance market, is -- was not growing that fast, and we have a good market share there. Ersek insisted several times that, despite the "pricing adjustments" and lower margins through 2014, that Western Union is a "premium product" (RS: surely it's a service, rather than a product?). This concerns me. All customers have to do is try a competing service once, and if it works, the "premium" cachet of Western Union evaporates for that consumer, and with it any incentive to pay a premium.
TLTRPLA; (Too lazy to research, please reply anyway)I'm paying for cross-border services via Paypal -- not my favorite mechanism, but convenient -- where the payee eats the service fees. To what extent is Western Union susceptible to encroachment by Paypal?-Rubic
I feel one of the more serious threats to WU, not often discussed is from the "havala" network, or the unregulated informal money transfers. This is a very popular amongst expat workers in Middle East to use to send money hope to Indian subcontinent and other Asian and African countries. These networks have existed for decades and used to avoid excessive forex regulations in many countries such as India.The efficiency and the trust in these havala networks is amazing. They have adapted amazingly well to mobile phone technology with virtually no IT or other investment. I have seen it in action in Dubai.If you want to remit money to your folks, you just go to a havala dealer. Usually they are in a poky little shop selling Sim cards, mobile phones or an assortmment of goods to expats. Sometimes it is just a guy with a mobile phone in a street corner or a tea shop. You fork out your cash and the mobile number of the recipient. The dealer sends an SMS with a code. The recipient shows the SMS to the dealer in his location and gets his cash immediately. Even if the recipient has no mobile phone, the transaction can be consummated in real time. The recipient just goes to the dealer at a prearranged time. The sender's dealer calls his counterparty and instructs him to pay the recipient. The recipient is paid and confirms this to the sender on the same call using the dealers' phones. For many poorer, "unbanked" and "undocumented" people this is much preferable and convenient to use than a WU outlet or other regulated networks. This beats WU for speed, efficiency,cost of remittance, ease of use, and dealers have a much better ROI than any WU outlet.
You must recognize that we are not the customer of WU, but most are immigrants who know the system works. They have been working long hours at low rates, the last thing they want is to risk the small (large to them) for a few dollars.When my son was in the navy, we used WU a few times to send him money. We are cheap BUT never questioned the cost.
Before the baby gets thrown out with the bath water its perhaps worth considering that WU is being valued as if it were a business with declining earnings. It isn't.But they are forecasting a 10-15% decline in 2013 based on the latest guidance. This is likely the source of the market's concern. Maybe the predicted decline will not materialize, or maybe earnings will stabilize or improve after 2013. If the company can continue delivering earnings even at the reduced guidance for 2013 for the long term, then the shares are certainly cheap. But the market seems to be thinking that next year's decline will persist in subsequent years. If the markets closed for ten years (Buffett's test), would I be comfortable holding Western Union shares for the duration given the advances that are sure to come over that timeframe with mobile payment technology? The answer is no. If I think back to 2002, I never thought that it would be possible to carry a pocket sized computer with more power than the desktops of that era with constant connectivity everywhere I go. Phones with today's smart phone capabilities could very well flood emerging markets by 2022 while the rich world gets even greater capabilities. Mobile wallets technology has already made surprising inroads in places like Africa (see this article from The Economist: http://www.economist.com/node/21554744). Excerpt:The poster-child of mobile banking is Kenya, where some 14m people now save and send money using M-Pesa, a telephone-based banking system. It allows them to deposit with or withdraw cash from a network of small agents. Similar systems have also been deployed in places such as Bangladesh, Uganda, Nigeria and the Philippines, but with less success.If I'm an Kenyan immigrant working in the United States, is it likely that in ten years I might have the ability to use my own cheap smart phone to electronically transfer funds to my relative in Kenya who is already familiar with mobile banking in 2012? I think it is likely.Western Union seems like the classic middleman with an extensive physical network facing the risks of electronic disintermediation. They may well find a way to participate in the electronic funds transfer world (the name brand alone will help) but what will the margins and market share look like in ten years? I have no idea but I do know that the business has negative tangible equity and the margin of safety rests entirely with its ability to preserve its earnings stream and I'm not confident that it will succeed.
I'm paying for cross-border services via Paypal -- not my favorite mechanism, but convenient -- where the payee eats the service fees. To what extent is Western Union susceptible to encroachment by Paypal?-Rubic A threat insofar as it's a reasonable alternative--if you have a credit card/bank account. Many of WU's customers have neither. Is there any reason a prepaid mobile phone shouldn't work in the future as a store of value as well as a channel, in WU's terminology? If you can buy cards to add credit to your own mobile, why not send credit to Mom in Jakarta? If she can then withdraw that credit (minus a small percentage for a transaction fee), you've done an end run around WU and all the other remittance services. Hmm.
To what extent is Western Union susceptible to encroachment by Paypal?...A threat insofar as it's a reasonable alternative--if you have a credit card/bank account. Many of WU's customers have neither. ...and assuming that Paypal even does business where you live.Their coverage is spotty. Not available where I live, for example.As an aside, I once read a summary of Paypal that commented that they had succeeded at "institutionalizing poor service", which which I'd concur most emphatically.The fact that they continue to do well despite this seems the sign of a moat.Jim
Western Union seems like the classic middleman with an extensive physical network facing the risks of electronic disintermediation. They may well find a way to participate in the electronic funds transfer world (the name brand alone will help) but what will the margins and market share look like in ten years? I have no idea but I do know that the business has negative tangible equity and the margin of safety rests entirely with its ability to preserve its earnings stream and I'm not confident that it will succeed.Exactly, a beautiful summary expression of my concerns.I also agree that Paypal has not succeeded in supplanting banks or WU for this kind of transaction - they seem to have squandered what would have seemed to be a wonderful opportunity to do this better. But as robinstarveling mentions, mobile phones may very well succeed where Paypal has failed, because although many people do not have a bank account or a credit card or a Paypal account, they do have a cell phone and cell phone credits, usually prepaid. There are 3.4 billion mobile phone accounts in the world, and most of those are pre-paid, especially in developing countries, where mobile phone coverage is high. There are now many services that allow you to transfer credits to someone else's mobile phone account - often called top-ups. This one for instance: http://www.transfer-to.com/marketoverview , but also established mobile phone companies like Vodafone offer the service.I think the days are numbered for chains of shady stores where you transfer people's cash while charging them outrageous fees. Maybe they will survive for some reason (although I can't really think why), but they will not be able to maintain anything like their current profitability. I would stay away from the whole sector, at least on the long side...Regards, DTM
[Havala network] beats WU for speed, efficiency,cost of remittance, ease of use, and dealers have a much better ROI than any WU outlet. What are their margins like? I seriously doubt they will give a better rate than WU in terms of currency conversion or service fees.
Putting my money where my mouth is, at lunch I opened a smallish short position in Moneygram, at $15.70. It has some nice features, for a short:-operates in an industry which has serious competitive threats from new technologies-declining revenues (losing market share to Western Union)-#2 in the industry, so they charge lower (still outrageous) fees, 10% on first $100 (rather than WU's 14%), same 3% currency conversion fee-microscopic profits last year (P/E=270), trading for a fairly hight multiple of about 20 times estimates for this year, and losses in prior 3 years-seem to be vulnerable to a recession, since 2009 earnings were down steeply-indebted: debt to equity not really relevant since equity is negative, but they have a market cap of $880 million, and lt debt of $839 million, with free cash flow of $20 million last year, so let's just say they're heavily indebted-outrageous exec compensation (over $10 million a year for top 4 execs, for an operation that takes in $1.2 bn and makes $40 mn net income)-and as a bonus, today, a couple of days after WU's earnings miss, MGI announces a delay in their Q3 earnings report, without saying why (I only saw this after opening my short, but it doesn't hurt)Regards, DTM
Was the Morningstar report put out prior to the latest Q report? I would guess so.Yes. Here is a summary of today's take on the latest developments:The numbers reported for the quarter were not horrible. Revenue and operating profit grew just shy of 1%. EPS was $0.45 versus $0.38 last year because of a lower share count and lower taxes.Transactions fell slightly in the quarter. The company announced plans for more price reductions. With a weak global economy the company now expects EPS for the year to be a little more than $1.60. Morningstar has reduced their fair value estimate for Western Union to $25 a share, down from $29. In spite of developments they still consider the stock too cheap (after all, at current prices, it's less than half of what they consider to be fair value.)kelbon
Can anyone please show me how to find Todd Combs previous investor letters. I have been following his ideas and results and they are truly outstanding. Also, does Weschler have any old letters that are floating around. Any help would be greatly appreciated
Interesting article from The Economist regarding efforts by the Indian government to set up electronic bank accounts for welfare recipients who have been biometrically identified:http://www.economist.com/news/leaders/21565957-why-india-sho...The system is designed to replace in kind welfare with cash transfers less likely to be stolen by middlemen. The implications of 1.2 billion Indians having electronic banking accounts is not something that seems positive for money transfer businesses relying on a moat made up primarily of widespread physical agent locations...
The implications of 1.2 billion Indians having electronic banking accounts is not something that seems positive for money transfer businesses relying on a moat made up primarily of widespread physical agent locations... And once someone has a bank account, an email address will soon follow (paper statements & delivery = expensive), meaning I can then PayPal transfer money (at least w/ $US) to anyone living anywhere for free with only a few days delay.The moat keeps filling in.et
It looks like Tom Gayner sold his entire position in Western Union based on the latest 13-F. Here's recent activity in the stock from dataroma:http://www.dataroma.com/m/activity.php?sym=WU&typ=aIt wasn't a large position for Markel but it was a stock that he was accumulating for several quarters until selling the entire position in Q3.Either we will see Berkshire with a significant WU position when the next 13-F comes out or Combs must have changed his mind regarding the sustainability of the company's moat.
This is an interesting article on Western Union by a blogger I follow who recently read the 10-K and writes about his initial impressions:http://www.gurufocus.com/news/197914/whats-your-research-pro...Anyway, I'll stop posting things related to WU ... Kind of off topic unless Combs buys it. My view is that he is buying now or has fundamentally changed his views on the economics of the business in the time since he owned it in his hedge fund. We will know in 3 months...
Berkshire's 13-F does not show a position in Western Union which I expected to see if Combs still felt the same way about the company as he did when running his hedge fund. The stock was crushed in Q4 based on a negative 2013 outlook. Western Union released Q4 and 2012 results last week and guidance for 2013 looks poor. They seem to have to constantly make "pricing investments" which is simply a euphemism for having to cut prices in an increasingly competitive market. Operating margins are probably going to be around 20% in 2013 which is way lower than recent years. Management says that the "pricing investments" in 2013 should lead to growth in 2014/2015 but I don't think they have much credibility. Further such "investments" may be necessary in 2014 and 2015 leading to even lower margins. On a positive note, they are returning the majority of free cash flow to shareholders which seems like the right thing to do given the trajectory of the business.Combs must have changed his mind on Western Union at some point over the past couple of years. I wonder whether a discussion with Buffett or Weschler on the competitive landscape might have influenced his lack of activity in the stock in Q4.
Combs must have changed his mind on Western Union at some point over the past couple of years. I wonder whether a discussion with Buffett or Weschler on the competitive landscape might have influenced his lack of activity in the stock in Q4. While it seems that C & W have been given a fairly loose rein, I wouldn't be surprised if they enjoy and benefit from discussing this kind of strategic question with B, and he might share my view that this business's moat is vulnerable. He might also have some insight into regulatory risk, given the potential activist role of the Democratic administration in trying to combat financial businesses that take advantage of vulnerable individuals. And he might also impose some ethical constraints, for instance against investing in tobacco companies, which could conceivably rule out investing in money transfer businesses charging usurious rates. But I think the threatened moat is the most likely explanation for avoiding a business which seems to have good numbers right now.Regards, DTM
But I think the threatened moat is the most likely explanation for avoiding a business which seems to have good numbers right now.I agree. The numbers are still respectable and the stock is not expensive but I can't help but viewing these expensive money transfer services as melting ice cubes. At least management is returning lots of cash to shareholders through repurchases and dividends.
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