So – it has been a while since I have actually posted anything on this blog – and, not surprisingly I have even missed on posting when I did say I would post. But heck, this is a blog – not my job, so on occasion I will be missing out on promises 🙂
Today I will talk a little bit about the company I currently work for. This is a company that I may be investing in, in the future as I have been perpetually considering doing so however have not done so yet. First of all, a few fundamentals.
The company name is FIS Global and it is probably one of the largest companies that nobody knows about (I sure as heck didn’t know it existed until they actually bought a small-size, yet very profitable, shop for which I worked before called VCMG – Value Centric Marketing Group). They mostly deal in payment processing and providing back-end systems to all the major tier-1 banks such as JPMorgan Chase – while also providing wealth management platforms for some Canadian banks as well as (after acquiring VCMG) loyalty solutions for both financial institutions as well as clients such as SAKS 5th Avenue, GE and small-medium size Convenience Stores associated with smaller gas stations all over the US. You can actually read up a little bit more about this company’s history here
There are really 3 key factors why this company is a good investment:
1. They have been shifting their image from an Information Technology company to a Financial Services company.
2. They power a significant chunk of tier-1 banks’ back-end platforms
3. They have virtually no competition in the loyalty business in the US when it comes to c-stores (Convenience Stores)
Let’s take a look at each of the points:
1. From a risk-management perspective, no matter whether there is a financial crisis or not, IT companies have a much higher risk associated with themselves than Financial Services company. The re-branding of FIS Global as a Financial Services company is meant to portray a lower risk thus attracting more investors
2. Unless the majority of the tier-1 banks and other banks go out of business, there is no way on earth that FIS Global will go down the drain. Reality is that if FIS Global goes out of business, the banks will go out of business – or at least will be in dire straights. Of course, there are always unexpected quirks in the system like the 2008 meltdown which took down with it a few of the big banks – but they did not result in FIS actually going down the drain. If anything it put it into an opportunity for a buy – as you will be able to see from one of the charts that I will post.
3. Loyalty is a complex business to be in (I know, because I’m working in it) and the business rules are right down anally-complex and the FIS loyalty platform I can honestly say, covers 95% of what any and every potential client will ever need. If the need is not met, the developers will make it happen. Also, one needs to understand the c-store business model in the US. Whereas in Canada you have 3-4 major gas stations (and a few really smaller chain like Husky up north), in the US, every single state has 1 or more chains of smaller gas stations with associated c-stores. These can range in size from just 3-4 sites to 35 sites to 500 sites. Reality is that they all compete against all the big gas stations such as Shell, Citgo, Esso, etc… All of these big players offer loyalty services – but these loyalty services are fairly crude to say the least – for example, they may not offer options to redeem a choice of $0.10, $0.20 or $0.50 cents off per gallon for 2,000, 5,000 or 10,000 points – this is something that the FIS Loyalty platform does offer. It also offers the ability to analyze non-loyalty transactions for certain POS (point of sale) types in order to provide context for the loyalty transactions – what is the penetration of a given promotion as compare to other types of promotions across a certain population that spends between $20-$40 over a time period on non-fuel related items? These are the type of questions that can be answered with the FIS Loyalty platform – which you simply will not find in any other solutions offered.
Now, let us take a look at what the analysts have to say:
As you can see the vast majority are indicating a “hold” pattern. The reason for this is because FIS Global has been trading at its 52-week high after increasing substantially from what it was quoted at for example in 2011. Here is the chart for the price raise:
I personally think that this would be an awesome long term investment for individuals who want to accumulate steadily over a longer period of time. I personally do not own a single share of this company because my investment strategy is much more aggressive than steady accumulation over 2-3 years. However, if I did have about $20k / year to spend I would more than likely put in into FIS year after year. They also do pay a divident by the way. I may also consider investing into it because as an employee I do get a deal which works out to essentially getting shares at a considerable discount.
This concludes my introduction about FIS Global. As always, the above is purely my own personal opinion. I am not a professional, certified stock broker and I could be bloody wrong. You should not buy this stock solely on my own opinion and you should make your own educated decision before investing in either this or any other company on the stock market. And – I will not be held accountable for any gains or losses that you may incur as a result of purchasing stock in this particular company. I seek safe harbor.
All the best!
Addendum: I have since decided to actually purchase shares in FIS but only because I’ve been recently thinking of a conservatively aggressive (I know, and oxymoron – I love oxymorons) savings medium that would in general a) beat the interest rate in the bank b) beat inflation itself while c) keeping an upside potential and yet d) being somewhat “sheltered”. Since over a period of a year the plan that is offered by FIS eventually gives me the equivalent of shares purchased at a 30% discount, I figured it matches all my points above and therefore from now on I will be putting 15% of every pay cheque towards the share purchase plan.