Guru Alan Fournier (Trades, Portfolio) purchased a 3,203,686-share stake in PayPal Holdings (PYPL, Financial) in the first quarter.
PayPal Holdings was originally founded in 1998, with the name Confinity. Max Levchin, Peter Thiel, Luke Nosek and Ken Howery were the founders. In March 2000, Confinity merged with X.com, an online banking company founded by Elon Musk. Musk was optimistic about the future success of the money transfer business Confinity was developing. Musk and then-President and CEO of X.com Bill Harris disagreed on this point, and Harris left the company in May 2000.
In October of that year, Musk made the decision that X.com would terminate its other Internet banking operations and focus on the PayPal money service. (The X.com company was renamed PayPal in 2001.)
In October 2002, PayPal was acquired by eBay (EBAY) for $1.5 billion in stock, of which Musk received $165 million. Before its sale, Musk was the company's largest shareholder, owning 11.7% of PayPal's shares.
Since PayPal was sold to eBay 14 years ago, PayPal Holdings has grown exponentially. It has a market cap of $47.17 billion, an enterprise value of $32.61 billion, a P/E ratio of 45.76, a P/B ratio of 3.49 and a quick ratio of 1.53.
Alan Fournier (Trades, Portfolio) may have decided to invest in PayPal Holdings for the following reasons;
- PayPal Holdings has 18 years of experience in its industry.
- The company has increased its gross profits by 14% annually since 2012.
- The company has reported fantastic financial results over the previous trailing 12 months with EBITDA growth (139.20%), operating income growth (137.70%), free cash flow growth (149.60) and book value growth (56.90%).
- It's possible that Fournier sees PayPal Holdings as having a strong differentiation against its competition because it has 18 years of experience in the Global Credit Service industry.
- PayPal Holdings continues to be at the forefront of the digital payments revolution. PayPal gives people better ways to manage and move their money, offering them choice and flexibility in how they are able to send money, pay or get paid.
- PayPal Holdings has zero debt.
Below is a Peter Lynch Chart for PayPal holdings.
Fournier graduated from the Wentworth Institute of Technology in Boston with a degree in mechanical engineering in 1983. After working for several years in the engineering field, Fournier decided to change direction in life. In 1988, he began his investment career working at Sanford C. Bernstein. From 1996 to 2001, he was in charge of global equity investments at Appaloosa Management, where he met David Tepper (Trades, Portfolio).
In 2001, Fournier formed his own hedge fund, Pennant Capital Management. The firm currently owns 37 stocks with a total estimated value of $3.50 billion.
Cheers to your investment success.
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