the future of payments joe magyer 1. 2 focus –widening moats –margin of safety performance...
TRANSCRIPT
![Page 1: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/1.jpg)
1
The Future of Payments
Joe Magyer
![Page 2: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/2.jpg)
2
![Page 3: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/3.jpg)
3
• Focus– Widening Moats– Margin of Safety
• Performance– Annualized returns of 10.5% versus 5.4% by
the S&P 500 since inception in 2004.– “Top 10 Investing Newsletter of 2011” --
MarketWatch
Inside Value
![Page 4: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/4.jpg)
4
• Recessions Happen– 14 in the past 84 years– S&P 500 up 1,100% over past 30 years– Stocks have fallen in 30% of years since 1825
• Shrinking Time Horizons• Flight to Safety
– Low Yields– High ERP’s
A Case for Optimism for Stocks
![Page 5: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/5.jpg)
5
Shrinking Time Horizons
![Page 6: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/6.jpg)
6
Record Low Yields
![Page 7: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/7.jpg)
7
1. Why Change Happens
2. Big Trends
3. Metrics That Matter
4. Stocks to Avoid
5. Favorite Payment Investments
The State of Payments Today
![Page 8: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/8.jpg)
8
1. Convenience
2. Security
Why Change Happens
?
![Page 9: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/9.jpg)
9
1. Paper to Plastic
2. Offline to Online
3. Mobile
3 Big Trends
![Page 10: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/10.jpg)
10
Paper to Plastic
Checks Credit Cards Debit Cards Cash The Rest 0%
5%
10%
15%
20%
25%
30%
35%
U.S. Transaction Share EstimatesSource: The Nilson Report
2005 2010 2015
![Page 11: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/11.jpg)
11
• Plays to plastic– 86% of global transactions are done in cash.
• Source: MasterCard
– U.S. e-commerce only 5.1% of total retail• Source: U.S. Census Bureau
• Buy the Numbers: – U.S. e-commerce spending up 15% YOY.
• Source: U.S. Census Bureau
– Global internet penetration still only 32%.• Source: internetworldstats.com
– Amazon’s membership growth is accelerating
Offline to Online
![Page 12: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/12.jpg)
12
• Buy the Numbers– Only 18% of mobile phones are “smart”
• Source: Mary Meeker, 2012 Internet Trends
– 29% of USA adults own tablets or e-readers• Source: Pew Research Center
• PayPal Mobile Payment Volume– 2010: $800M– 2011: $4B– 2012: $7B $10B
Mobile
![Page 13: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/13.jpg)
13
1. Network Size– Market Share– Merchants– Users– Trajectory
2. Activity– Transactions / User– Trajectory
Metrics That Matter
![Page 14: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/14.jpg)
14
• Changes at the Point of Sale– Near field communications (NFC)– PayPal– Square
• Greater focus on speed and convenience.• More than one winner.
What’s Next?
![Page 15: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/15.jpg)
15
• Small gain – if any – on security and convenience for stakeholders
• Doesn’t displace current card networks• Commerce is heading to an online POS• Need adoption from numerous stakeholders:
– shoppers– merchants– card issuers– handset manufacturers– point-of-sale terminal producers
Why I’m Skeptical on NFC
![Page 16: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/16.jpg)
16
• Amazon.com– Amazon Payments– Long reach, strong brand
• Apple– Tightly controlled ecosystem– 400M iTunes accounts with credit cards
• Google– Google Wallet– Google Checkout
• Square
Long-Shot Dark Horses
![Page 17: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/17.jpg)
17
• Western Union (NYSE: WU)– Strong execution and capital allocations...– But behind the technological 8-ball
• Brinks (NYSE: BCO)– Sorely underfunded pension– Long-term slog ahead
• Coinstar (Nasdaq: CSTR)– Disintermediation on two sides– Premium valuation
Cigar Butts to Avoid
![Page 18: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/18.jpg)
18
• Recent price: $47• Market Cap: $62 Billion• T12 Revenue: $13.5 Billion• Cash/Debt: $9.1 Billion / $4.5 Billion• P/E: 20.2• Dividend Yield: 0.0%• Return on Equity: 21.3%
Favorite: eBay (Nasdaq: EBAY)
Disclosure: Joe owns shares of eBay.
![Page 19: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/19.jpg)
19
eBay’s Stock Price
![Page 20: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/20.jpg)
20
40%
53%
7%
eBay: A Tale of 2 Networks
![Page 21: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/21.jpg)
21
• The Business– 108 million users and growing– Textbook example of a network effect
• A Turnaround– Best quarter since 2006– Great mobile presence– Sales growth is accelerating
Marketplaces
![Page 22: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/22.jpg)
22
Active User Growth
![Page 23: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/23.jpg)
23
• 117 million active users– 1 million new users a month– Doubled over 4 years
• Growing 2x Marketplaces• First-Mover Advantage• Accelerating Growth
Payments
![Page 24: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/24.jpg)
24
PayPal: Devouring Share
![Page 25: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/25.jpg)
25
Favorites: eBay
![Page 26: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/26.jpg)
26
1. Lots of competition in Payments
2. Amazon is fierce
2 Key Risks
![Page 27: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/27.jpg)
27
• Accelerating growth• Strong balance sheet• Well positioned in mobile• Attractive valuation• Possible spin-off
Recap: eBay
![Page 28: The Future of Payments Joe Magyer 1. 2 Focus –Widening Moats –Margin of Safety Performance –Annualized returns of 10.5% versus 5.4% by the S&P 500 since](https://reader036.vdocuments.site/reader036/viewer/2022062320/56649c935503460f9494fa0e/html5/thumbnails/28.jpg)
28
Special Offer
www.mot.ly/IVSpecial