Dear Reader,
A lot of you have written in asking about PayPal, so I wanted to address that today here.
We started recommending PayPal (SYM: PYPL) in May in the low $60s.
It just broke $70 a share, and this is a good example of something I learned on Wall Street…
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Early on in my career I asked a very wealthy mentor for advice…
“Should I focus on research, should I focus on sales, should I focus on banking,” etc.
And he said to me:
“Dylan – you can make money doing any one thing…
“You’ve just got to focus on that one thing and you will do very, very well.
“Don’t try to do 50 things; you’ll make money doing one.”
And that was really, really good advice. And it reminds me of PayPal.
PayPal crashed from $300 a share a few years back, down to below $50. And that’s because the management team that ran PayPal before was trying to do too many things.
They weren’t focused on their bread and butter which was trying to help people make online transactions easier – a good “one thing” to focus on…
It’s like Visa and Mastercard but for online.
I recommended PayPal in May, and reiterated it again for readers this month and I’ll tell you why:
Previously, PayPal had a CEO who was trying to do a bunch of things. He broke the rule of one.
I had been watching PayPal…
I saw the CEO get replaced…
And then, everywhere I went to buy something online I started to see a new “Pay with PayPal” option pop up.
This is very convenient, because besides Amazon and a few other places, it’s not that easy to transact online.
You’ve got your phone out, ready to place an order, and then you have to find your credit card, type in all the numbers, turn it over, type in your code…
So when I see PayPal and I can buy in one click, I love it. And I’ve started seeing that more and more.
It seems to me the new CEO, Alex Chriss (who came from Intuit) understands the rule: focus on one big thing. Try to solve one big problem. Don’t try to be all things to all people. Invest in the power of ONE.
And since he refocused the company, they’re trying to push further into payments.
Which is great – don’t go wide, go deep, especially when you have a business like this…
Their core business has a 20% return on equity. Meaning for every $1,000 they invest in their business they earn $200.
Now, the average return on equity for an American corporation is about 12% (every $1,000 invested earns $120).
So PayPal has high returns on equity and a very cheap stock price, which is why we’ve been focused on it.
And this week, news came out that Apple is going to allow PayPal into their payment store.
So when you’re on the Apple Store you can buy things with PayPal now, in lieu of Apple Pay.
I’m very happy with this investment.
I think PayPal has tremendous upside. I am very, very bullish.
I love it, so just wanted to answer these questions coming in.
“The Buck Stops Here”
P.S. I just sent out my No. 1 Takeover Target for August…
It’s a stock trading around $50 that I predict is about to get bought out for up to $200 a share.
Hedge fund billionaires Ray Dalio, Paul Tudor Jones and Jim Simons have been aggressively buying shares.
