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Fierce Competition – Credit Card Processors Held by Numerous Gurus

September 27, 2013 | About:
Sally Jones

Sally Jones

49 followers
In a world of pay-by-plastic, e-commerce and mobile shopping, competition for electronic payment processing is fierce. Here’s a look at two very different credit card processors that provide electronic commerce and payment solutions. Both Total Systems Services Inc. and First Data’s owner KKR & Co. LP are up over 12 months and have a market cap of around $5 billion, but Total Systems Services may pull ahead in the next few years by aggressively entering the pre-paid card market of general purpose reloadable cards and payment cards, a global market that is expected to double in a few years.

Total Systems Services Inc. (TSS)

Up 22% over 12 months, Total System Services Inc. has a market cap of $5.52 billion; its shares were traded at around $29.45 with a P/E ratio of 23.20. The dividend yield is 1.37%.

Incorporated in Georgia, Total System Services Inc.is a global payment solutions provider that provides services to financial and nonfinancial institutions. The company provides services through three operating segments: North America Services, International Services and Merchant Services.

TSS recently acquired a company called NetSpend to gain entry into the prepaid card arena, a market that is expected to double over the next four to five years, according to a company press release. NetSpend is the second largest provider of general purpose reloadable cards and payment cards in the U.S.

The company reported financial results for the second quarter of 2013, with revenues of $478.4 million, up 3.4% from the same quarter a year ago. The company’s operating income was down 1.1% year-over-year, not including the NetSpend acquisition expenses. TSS total revenues are $943.4 million, year-to-date, and up 2.1% over the same period in 2012.

Guru Action: As of June 30, 2013, nine gurus hold TSS and there is very active insider selling.

Jim Simons is the top Guru stakeholder with 4,564,465 shares or 2.41% of shares outstanding. He increased his position by 5.52% in the second quarter, buying 238,700 shares at an average price of $23.80 for a gain of 22.5%.

In his five-year history, he has averaged a gain of 24% on 4,564,465 shares bought at an average price of $23.555 per share.

Long-time stakeholder, Steve Cohen made a new buy in the second quarter gaining 22% on 551,954 shares bought at an average price of $23.80.

After a history of pure gains since the second quarter of 2009, Paul Tudor Jones gained 22.5% when he sold out his holding of 12,800 shares at an average price of $23.80.

His trading history:

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Track historical share pricing, revenue and net income:

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A key competitor of Total System Services is First Data Corporation, a global electronic commerce and payment processing company headquartered in Atlanta, GA. First Data was bought by KKR & Co. LP (KKR) in 2007, and trades under the ticker KKR; however, First Data has a website and does business under its own name. Hard hit by global recession and too much debt, First Data was acquired by KKR & Co. in one of the largest leveraged buy outs in history, financed with around $26 billion in debt.

KKR & Co. LP (KKR)

Up 35% over 12 months, KKR & Co. LP has a market cap of $5.58 billion; its shares were traded at around $20.67 with a P/E ratio of 12.70. The dividend yield is 8.11%.

Incorporated in Georgia, KKR & Co. LP was founded in 1976. The company offers a broad range of asset management services to its investors and provides capital markets services.

KKR & Co. reported financial results for the second quarter of 2013 with a net income of $227,258,000, compared to $1,505,143,000 in the same quarter in 2012. Company revenue was reported at $166,376,000 for the second quarter of 2013, compared to $112,360,000 in the same quarter a year ago.

First Data Corporation reported financial results for the second quarter of 2013 with consolidated revenue of $2.7 billion, reflecting a 1% increase over the same quarter a year ago. The company reported a net loss of $189 million for the quarter, compared to a net loss of $157 million in the same quarter of 2012. First Data’s adjusted EBITDA increased by 2% year-over-year, at $633 million for the quarter.

Tracking:

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Guru Action: As of June 30, 2013, there are 10 guru stakeholders and active insider trading.

Three gurus made new buys in the second quarter. None sold out.

Top Guru shareholder, John Rogers, holds 7,162,095 shares or 2.58% of shares outstanding after he reduced his position by 6.29% in the second quarter. He sold 480,821 shares at an average price of $19.85 per share, making a gain of 1.3%.

In eight quarters of holding, Rogers gained 56% on 7,839,237 shares bought at an average price of $12.87 per share. He gained 5% on 677,142 shares bought at an average price of $19.23 per share.

Use the GuruFocus Value Screen to find 52-Week Lows and discover potentially deep value stocks held by billionaire Guru investors.

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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 3.2/5 (5 votes)

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