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True Wealth’s “Tiny Device That’s Eating the World”

Brett Eversole tantalizes us with the promise of becoming "UBER Rich" as you can "Make Up to 5 Times Your Money From the Mobile Payment Revolution"

Brett Eversole has a new ad letter out promoting subscriptions to True Wealth, Steve Sjuggerud’s “entry level” newsletter service over at Stansberry, and it sounds awfully exciting — how do we make 500% returns, and what’s the “tiny device that’s eating the world?”

Well, the ad is all about mobile payments — using your cell phone to send and receive money and to make purchases. And the basic gist is that the smartphone, which is that “tiny device that’s eating the world,” will do to money what it did to landline telephones, cameras, flash lights, dictionaries, etc… that is, it will make old-fashioned cash money nearly obsolete.

That’s obviously horrifying for anyone concerned with privacy (no electronic currency is truly anonymous or untraceable, like cash can be) or reliability (how often does your cell phone or its battery stop working properly for you?), but it is indeed the trend — more and more payments are being made using mobile devices, and in some ways we are pretty far behind the curve in the US when it comes to this trend.

And to entice us with the possibility of these untold riches coming our way, the ad implies that you can get “UBER Rich” just like a few investors they mention in their examples.

This isn’t really germane to the specific mobile payments companies they tease as their “secret” recommendations, and we will get to those, but I want to digress for a moment — because each of these “success stories” helps to build up those daydreams in your head, and it’s the daydreams of wealth that make investors subscribe to newsletters… and sometimes take risks they probably wouldn’t otherwise consider.

So who are these “UBER Rich” investors? Are they people like you, who just happened to listen to a stock idea and got wealthy because of it? Let’s see…

“In short: as the smartphone transforms this industry this year, ordinary investors stand to get rich…

“Meet “UBER Rich” Investor #1: Garret G.

“Like Garrett G. from Utah.

“In 2011, a company called Scan Inc. began developing a way to scan barcodes from a smartphone.

“When the company was bought for $54 million three years later, early investors, as well as Garret G., became ‘UBER Rich.'”

OK, so what does he mean by “UBER Rich?”

“I call this group of individuals the ‘UBER Rich,’ not just because of how wealthy they have gotten (Which, as you’ll see in a minute, is incredible).

“I also call these people the “UBER Rich” because they are putting their money behind innovative companies, with two distinct traits.

1. Each utilizes the smartphone to disrupt the status quo… making a technology or task more convenient.
2. They all see explosive success and help ordinary people get rich.

“Ironically enough, it’s the same approach that Travis Kalanick, the founder of ride-sharing taxi service, UBER, used to become ‘UBER Rich’ by turning his idea into the world’s most valuable start up in just seven years.”

OK… so that Garrett G.? That’s actually Garrett Gee, who started the company Scan, Inc., raised millions, pitched it on Shark Tank, and, while he was still a college student, sold it to Snapchat.

That’s not a story of investor success, that’s a story of entrepreneurial success and good fortune — a fascinating story, but not one that has much direct meaning for folks like you and I who are considering how to allocate our 401(k) savings for retirement.

What’s the next “UBER Rich” investor?

“I recently heard about a guy named Tony F., from Detroit, Michigan.

“By all measures, Tony grew up in an average middle-class household. His father worked as a Levi’s jeans salesman and his mother worked as a hospital administrator.

“But Tony’s story took a remarkable turn…

“In 2010 a company called Nest started to develop smartphone technology to control and monitor your home heating and cooling systems through an internet-connected thermostat.

“The technology was a hit, and four years later Tony sold his stake for more than 20x his money — enough to turn a $10,000 stake into more than $200,000.”

Oh, for pete’s sake — this is, again, not a case of a person who “sold his stake for more than 20X his money” as an investor. Tony F. is Tony Fadell, and his story took a remarkable turn a long time before he cofounded Nest — a decade before starting Nest with a fellow Apple alum, he was part of the group that designed the first iPod for Apple (he’s often referred to as the “father of the iPod”). I don’t know if he put his own money into founding Nest, but he certainly might have, and he raised a bunch of venture money as well… and Nest was acquired for $3.2 billion by Google three years ago, so probably everyone involved got rich. But not “regular investors.”

(And it hasn’t gone all that well since then, Fadell left Alphabet last year right around the time that Alphabet’s newly cost-conscious leadership started to pressure Nest to generate some return on investment.)

More from the ad:

“Can you imagine how great it could be to make that kind of gain thanks to the smartphone?

“The truth is, it’s not just a fantasy. It’s the growing reality for many Americans…

“Dozens of whom are becoming ‘UBER Rich’ every day.”

Sure, dozens of people become rich every day. There are seven billion people in the world, and more than 200 million working-age adults in the United States. Just about anything you can think of, dozens of people do that every day.

Just don’t get it into your head that they do it because they followed a newsletter suggestion and invested $5,000 into some hot company.

So are all of these examples of “UBER Rich” investors that silly? Here’s the third one:

“Meet “UBER Rich” Investor #3: Mary M….

“Mary is a 57 year old woman from Portland, Indiana.

“A while back, Mary had an ‘aha’ moment that would change her life forever…

    “About a year before the iPhone launched… I had an old Motorola phone, and my Chinese friends were laughing at me. They were saying… you can’t use the Web on it…”

“She remembered that moment… And a few years later, in 2011, she jumped at the opportunity to get shares in a new startup company.

“The small business revolutionized the way Americans listen to music… especially on their smartphones….

“Today, Mary’s shares are up more than 700%. In other words, she’s “UBER Rich”.

“And life is good for her — Mary spends her time playing golf, being outdoors, having fun and eating great food.”

OK, so let’s be clear on something: Making a 700% gain on an investment does NOT make you “UBER Rich.”

It’s exciting, and it’s fun, and usually if you have a gain like that it’s because you’ve held a stock for a decade or more… or because you’re getting extremely speculative, and if you’re being that aggressive with your speculation then you know that this 700% gain is going to have to make up for a bunch of 50-100% losses along the way.

And, yes, this is no “ordinary investor” — this is a small slice of the story of Mary Meeker, who is, indeed a 57-year-old woman from Portland, Indiana… but she also was one of the most-followed internet evangelists in the 1990s and 2000s when she was an analyst and investment banker at Morgan Stanley (she played major roles in the Netscape and Google IPOs, for example), and she is sometimes even referred to as the “Queen of the Internet”. She left to become a venture capitalist in 2010 at Kleiner Perkins, and was indeed an early fan of and investor in Spotify, which I assume is the stock being hinted at here, but she’s not “UBER Rich” because of the fact that Kleiner’s Spotify investment did well. There was a good profile of her in Wired a few years back if you’d like to know more of her story.

Perhaps Meeker has a career that’s worthy of emulation, her enthusiasm is genuine and her insight into new trends and ideas is compelling, but it’s certainly not a “this person got rich because of a stock tip” story.

So, as I said, it’s not really germane to the main pitch of the ad from True Wealth… but I thought it was important to point out. Usually copywriters who put these ads together don’t actually know any investors who had great returns that would wow us, and they certainly don’t get specifics about the performance of “regular” investors unless some of their readers happen to send in a testimonial… so they use headline stories, famous people, and corporate insiders to manufacture their “this might happen to you” examples.

There are plenty of other examples of this in claims that we all see frequently in ads — stories like “Joe Shmoe got $54,000 in dividends from this stock just last month,” for example, are designed to help us daydream about the riches we might receive from our small investments, but are usually going to be a reference to the CEO or some other major insider who holds a large stake (and has to report that stake to the SEC, which is why we all know about it and the copywriter can have a “real” example to use).

But even if you’re not going to be “UBER Rich,” if you’ve read this far you’re probably curious about the ideas True Wealth is pitching to help us profit from mobile payments, yes?

OK, better late than never, let’s sift through the clues, feed them to the Thinkolator, and get you some answers….

Back to the ad to reset our “big picture” idea:

“According to a recent Business Insider report, the mobile payment industry is projected to grow at a compound annual growth rate of 80% from 2015 to 2020.

“At 80% annual growth… the mobile payments industry will expand nearly six-fold in just the next three years.

“But that number could be on the low side too….

“Revenues from mobile payment technologies (what the firms behind this technology actually earn) stand to grow even faster.

“Statista estimates that revenues will grow from just $25 billion in 2016 to more than $274 billion in 2021!

“That’s nearly a 1,000% increase in revenues for the companies behind the mobile payment revolution.”

And then we get to the four investments Steve SJuggerud and Brett Eversole are hinting at:

“If you want to make the most money possible there are 4 steps you can take right now that could put you on the right side of this market…”

We’ll go through them one at a time, get you a quick answer so you can cool your jets a little bit and stop drooling, and then you can take your time to think about the ideas before you decide what to do with your money…

“Step 1: Buy what will become the world’s largest company in five years.

“… probably less than 1% of Americans have ever heard of this company…

“Yet the company we were talking about — with offices in Silicon Valley — processed more mobile transactions in a single day of 2016 than PayPal processed the ENTIRE year!

“And it’s one of the fastest growing companies on the planet.

“Over the last year, the company has grown sales 47% and earnings an astonishing 37%… in one year!”

Sounds exciting, right? But wait! There’s more!

“Revenues increased fivefold from 2010 to 2015. And they could more than double again over the next few years….

“Nobody is talking about this company — yet. But they will….

“…. the #1 step you need to take right now to capitalize on the growth of mobile payments is to put some money in the company right away. You should consider putting some in for your kids and grandkids too. They’ll thank you later.”

So what is this one that their special report calls “Your Last Chance to Buy What Will Soon be the World’s Most Powerful Company?”

Tencent (0700 in Hong Kong, TCEHY for the ADR or TCTZF OTC in the US), the gigantic Chinese internet firm that has its fingers in hundreds of pies in the Middle Kingdom and around the world, but is primarily known for its QQ/WeChat platform that started as an instant messaging service and now, like Facebook, includes a plethora of additional features to enable communication, commerce, and, yes, mobile payments.

And yes, on Chinese New Years past their WeChat has processed more payments than PayPal processes in a year — that’s almost entirely in gifts of “lucky money” to celebrate the holiday, and a lot of it is in tiny increments (since 8 is a lucky number in China, 8.88 yuan is typically the most popular gift amount… that’s just over a dollar).

Tencent has doubled in size in just the past year or so, including a quick 30% spurt in just the past couple months, and it’s still growing fast — earnings grew at almost 50% year over year in their last quarter, thanks in part to growth in gaming and video (Bloomberg story on their recent earnings report here). Their payment platform in WeChat is gaining share in China, though it’s still smaller than Alibaba’s dominant Alipay.

I don’t know whether Tencent will hit any more hiccups along the way — they’re spending like crazy to develop new content, including backing Hollywood movies and developing their own video and gaming content, and they’re in competition with Alibaba and other Chinese giants (Netease, etc.) in many of their businesses so there is certainly the potential for profit margins to come down, but the growth rate is dramatic enough to excite just about everyone.

I’d personally be more interested in investing in Tencent through Naspers (NPSNY), the South African conglomerate which owns about a third of the company and therefore gets exposure to Tencent at a bit of a discount, but I haven’t talked myself into chasing Tencent in any form over the past few years — perhaps because I’m just bitter about selling my Tencent shares a long, long time ago. But yes, they might reach that “largest company in the world” spot at some point — with a market cap of $340 billion they just have to continue to outgrow Alphabet, Amazon, Apple and Facebook for a few more years. That’s perhaps made easier by the fact that they operate primarily in China, where Alphabet, Amazon, Apple and Facebook really can’t compete, so if China continues to outgrow the world, and Tencent holds off its large Chinese rivals, maybe Tencent will take Apple’s throne as the largest publicly traded company on earth in a few years. Or, since they’re fully dependent on China, perhaps the Chinese regulators will get nervous about a revolution and QQ and Wechat will be shut down some day — I don’t expect that, but surprises do sometimes come from China when their leaders feel their backs are against the wall.

What’s next for this mobile payments bonanza?

“Step #2: Buy the mobile payment revolution in one click

“Here’s the simplest, safest way to spread your investment dollars among businesses poised to make money from this trend.

“If our thinking is right, then mobile pay will explode in the U.S… Cash and traditional credit cards are basically done for, in the long run.

“With one click, you’ll get a piece of the infrastructure supporting this new technology… the software behind it… and the companies that will process the bulk of mobile payment transactions…”

That’s almost certainly the PureFunds ISE Mobile Payments ETF (IPAY), which holds many of the big “pure play” stocks in mobile payments and credit card processing — the top five holdings are PayPal, Visa, Mastercard, Worldpay and American Express, so it’s not a purely “mobile” investment… but it is, perhaps, worth considering because it’s becoming pretty clear that the dominant financial networks are likely to continue to be critical to mobile payments. Further down the list you’ll see other payment processing networks and service providers like Fidelity National and First Data, equipment providers like Ingenico and Verifone and Square… and even the old school is represented in the form of Western Union. If you like investing in digital payments as a growing trend and don’t like owning shares of banks, this represents a lot of those companies.

How about the other ideas?

“Step #3: Buy the small payment processor on its way to becoming one of the largest in the world

“Now, this company is still small… but it’s growing quickly.

“Operating income grew 330% in the past 5 years… and profits are growing even faster—up more than 750%. Both Forbes and Fortune magazine named it one of the fastest-growing tech companies in the world.

“With 61 worldwide offices, customers in 160 countries, and agreements with over 200 banks and 200 mobile operators… this company is perfectly-positioned to take advantage of the huge global growth happening in the mobile payments space.

“Best of all, the stock is cheap right now. Even one legendary hedge fund has been snapping up shares lately.

This must be Euronet (EEFT), which, despite the name, is based in Kansas (and yes, the other clues match — operating income up 330%, 61 offices, 160 countries, etc.)

Here’s how they describe themselves:

“Euronet Worldwide, Inc. facilitates the movement of payments around the world and serves as a critical link between our partners — Financial Institutions, Retailers, Service Providers — and their end Consumers, both locally and globally. Founded in 1994, Euronet has established itself as a leading electronic payments provider. Euronet’s customers are served from three core business segments: Electronic Financial Transactions (EFT – including Payments Software), Prepaid (epay) and Money Transfer. In 2015, the Company processed approximately $74 billion in ATM, prepaid and money transfer payments for approximately 200 financial institutions, 200 mobile operators, approximately 599,000 retailer and agent locations, and millions of individual consumers worldwide.”

The company has been in the news recently because of their failed bid for Moneygram (MGI), which will instead be acquired by Alibaba’s Ant Financial. I haven’t looked at Euronet since last year, when it was being teased by Larry Edelson as part of a “government’s war on cash” pitch — at the time, my concern was that “cashless” could hurt them as much as “mobile” might help, since one of their major assets was their European ATM network… but perhaps that story has changed over the past year. Their latest earnings presentation is here if you’d like to read up on the current situation.

And one more?

“Step #4: The small mobile payment play whose sales have soared 459%…

“… the last company you need to invest in right away is one that 99% of Americans have never heard of…

“In fact, this company DOES NOT trade on the NYSE or Nasdaq… so most investors don’t even know it exists.

“Which is incredible when you consider sales are up 459% in the past 5 years… an absolutely incredible growth rate.”

And apparently there’s one person who’s a particular key to this one:

“What’s interesting is this company just recruited a former technology executive from Credit Suisse.

“He was instrumental in executing a $50 million technology transformation strategy for the Australian Stock Exchange, and will now head over 1,000 employees as this firm grows to scale.”

So… hoodat?

Thinkolator sez this is Paysafe Group (PAYS in London, NVAFF OTC in the US), which is a relatively new name but an old company — they were formed from the combination of Optimal Payments and Neovia Financial, and also incorporate some other corporate and product names that might sound familiar to investors who’ve been around the block a few times (Neteller, Netbanx, Meritus, Skrill). They’re not particularly small, with a market cap of $3+ billion, similar to Euronet but it’s true that most of us US-focused investors won’t have heard of them. I hadn’t.

And yes, Paysafe did recently recruit a Credit Suisse tech guy — though that wasn’t his most recent job. They recruited Tim Thurman, who used to be the CIO at the Aussie exchange, to be their Chief Digital Officer, and he started just a few weeks ago. Paysafe holds the honor of being the least expensive of these four teased investments, based on trailing PE (their PE is 22, sez YCharts, lower than Euronet’s 26 and Tencent’s 50), and they have posted some excellent earnings growth over the past five and ten years… though they also had a big drop in earnings in 2015.

Here’s how the company describes itself:

“Paysafe provides digital payments and transaction-related solutions to businesses and consumers around the world. Paysafe is redefining payments by enabling fast, convenient and secure ways to pay before, pay now and pay later through its payment processing, digital wallets, prepaid solutions and card issuing, and acquiring products and services. We believe that every point of every payment should be relevant, simple and secure. With two decades of experience, Paysafe is trusted by businesses and consumers to move and manage money through more than 100 payment types and 40 currencies. Paysafe offers multi-platform products with an emphasis on emerging payment technologies including mobile. Paysafe’s brand portfolio includes NETELLER® and Skrill®, MeritCard, paysafecard®, payolution®, Income Access and FANS Entertainment.”

Growth seems likely to slow on the top line after the huge advance last year, but they do say they’ll continue to grow — this is the guidance they gave with the 2016 annual report:

“Management expects to achieve low double-digit organic revenue growth in FY 2017, while expecting to at least maintain a 30.1% adjusted EBITDA margin. This outlook is supported by trading year to date.”

So… double digit revenue growth and stable margins should mean double digit earnings growth, which is a reasonable goal for a company with a PE that’s at a slight premium to the market.

And with that, I’ll leave you to your own thoughts and cogitations on these four pitched ideas — if anything appeals to you, or you have experience with any of these investments, feel free to share your perspective with a comment below.

P.S. Ever subscribe to Sjuggerud’s True Wealth? Your fellow investors want to know what you thought — please click here to share your opinion.

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5 years ago

Travis, any comment or insight on the recent all time highs on crypto currencies like BTC and ETH?

👍 140