Summarizing seminar highlights of “Unfold the 10 Charming US Stocks” with BLS Global Investing

This time we, BLS Global Investing team, has specially prepared this alternate version of the Knowledge Sharing report for investors who prefer an English version. 🗽

 

It is a wrap of our special seminar “Unfold the 10 Charming US Stocks” from BLS Global Investing. Today, we have selected five interesting stocks from this seminar for our beloved investors. Let’s go and have a look!

Unfold the 10 Charming US Stocks with BLS Global Investing” 

  1. Warner Music Group Corp. (WMG)

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WMG is a major music company with interests in recorded music, music publishing and artist services. It is one of the “big three” recording companies and the third-largest in the global music industry, after Universal Music Group and Sony Music Entertainment. WMG has owned the recordings of many famous artists, i.e., Ed Sheeran, Bruno Mars, Coldplay, etc. Meanwhile, WMG has an affiliate in Thailand called “Warner Music Thailand” that is a home for timeless and legendary singers; Pongsit Kampee and Carabao.

WMG acquired EMP Online in 2018, a European online retailer, aiming to expand into E-commerce business. EMP Online focuses on selling fan merchandise related to music, movie, TV and gaming; for example, Happy Potter or Star Wars. We view that this acquisition would help WMG to diversify to another business, especially during the COVID-19 pandemic. With the strength of being a content and copyrights owner, WMG will be able to scale its music ecosystem by producing its artists’ merchandise and distributing via EMP Online channel.

The company’s revenue has spread across the business and all regions around the globe. Although the company experienced a loss last year, Morgan Stanley has forecasted that the company will generate $300mn profit by 2021 and its P/E will be at 54.4x.

 

wmg rev structure

Source: BLS Global Investing, as of 30/3/64

  1. UnitedHealth Group Incorporated (UNH)

United-Healthcare-Logo

UNH is one of the largest healthcare companies in the world. The company is a market leader in the insurance industry while being the second-largest healthcare company after CVS Health.

UNH has 4 businesses:

  • UnitedHealthcare: offers a full health benefits programs for corporate and personnel while also provides a health coverage for eligible low-income adults, children, pregnant women, elderly adults and people with disabilities in the US.
  • OptumHealth: offers access to networks of care provider specialists.
  • OptumInsight: provides consulting software and data analytics for hospital and healthcare organization to help managing more effectively.
  • OptumRx: provides pharmacy care services and programs, including retail network contracting, home delivery, formulary management, etc.

UNH has acquired a number of competing healthcare providers since 2019. Optum completed two acquisitions such as DaVita Group, the largest provider of kidney care services in the US, and Equian Group, which offers payment-processing services for healthcare companies. Regarding to its acquisition, this illustrates that UNH does not only focus on health services but also diversify to payment service as well. Furthermore, UNH bought PateintsLikeMe, a social platform startup that connects patients who have similar health conditions.  This community portal keeps growing with more than 830,000 people with over 2,900 conditions.

Its revenue is mainly contributed by UnitedHealthCare business, an insurance unit of the company, accounted for 78% of the total revenue. While the North America segment contributes almost 100% of the whole revenue.

unh rev structure

Source: BLS Global Investing, as of 30/3/64

  1. S&P Global Inc. (SPGI)

SPGI_original

SPGI is the world’s leading provider of credit rating, benchmarks and analytics in both global capital and commodity markets. Its revenue is driven by 4 business units:

  • Ratings: provides credit ratings to issuers on debt securities.
  • Market Intelligence: provides financial information for investing in capital markets; for example, Capital IQ is a platform that provides research, data, and analysis on private and public, similar to Bloomberg.
  • Index: an index provider of funds and ETFs for benchmarking, receiving benefits from a continuous increase in demand in passive investment.
  • Platts: provides information, benchmark prices and analytics for the energy and commodities markets (different from Capital IQ, which focuses on bond and stock market)

The company generates revenue from its credit-rating business the most, accounted almost half (48%) of the total revenue. This business is quite economically sensitive, benefiting from the current economic expansion. Moreover, the Market Intelligence and Platts businesses are relatively stable as more than 90% of their incomes are recurring.

SPGI was the first international credit-rating firm that has been approved to run its business in China since 2019. Being a first mover, the company can gain a significant market share before other international peers. The current number is expected to be around 20%.

 

 spgi rev structure

Source: BLS Global Investing, as of 30/3/64

Last but not least, SPGI and IHS Markit has entered into a merger agreement. IHS Markit is a global leader in information and at the same time a leading index provider. IHS Markit is more competent in bond markets indices. This merger would increase the scale of operation and complement each other in the index business.

 

  1. Visa Inc. (V)

IC_visa_PNG30

Many investors might not know that Visa card was originated from Bank of America card. Moreover, we are paying fees to Visa without being aware of it as we pay our bills via credit cards. That sounds interesting! Don’t you think so?

 

visa from bank of america

Source: BLS Global Investing, as of 30/3/64

Visa is a digital payment company, which serves customers around the world. The company held the highest market share of 62% in terms of transaction volume in the US, followed by Mastercard (MA) 26% and American Express (AXP) 10%. This is why we view that Visa would gain the most benefit from American Rescue Plan compared with other peers as $1,400 stimulus check would increase US consumer spending, resulting in higher transaction volume.

Covid-19 pandemic helps accelerating a shift from cash to digital payment. People are demanding for contactless options due to the risk of contamination. Visa could gain by providing digital option to customers. Additionally, we look forward to seeing the upside potential after the pandemic as people would be able to travel again, increasing the transaction volume.

 

  1. CDW Corporation (CDW)

CDW_Logo.svg

Investors may have never heard of this company before compared to the four companies above.

CDW is a provider of technology products and services for business, government and education. In early 2000, the company operated as an IT retailer and then developed and moved towards consulting services. Thus, CDW currently provides IT solutions to its customers who want to build cloud platform, or develop cyber security in the US, UK and Canada with total estimated customers of 250,000.

cdw rev structure

Source: BLS Global Investing, as of 30/3/64

CDW acts as a middleman between technology vendors, such as Apple and Microsoft, and their customers. As a result, when customers come to CDW, the company is able to provide the best solution for them through combinations of products from different big tech firms without investing large sums of money for production.

Since CDW does not only provide products to customers but also come up with solutions for them as well, we believe that the company could grow sustainably. Moreover, we see that CDW would gain after the covid-19 because many firms would adopt technology and increase their IT spending. Therefore, trends related to technology investment would benefit from this behavior shift.

Lastly, we think that investing in CDW is an alternative to get benefits from the growth of technology sector that CDW has partnered with, i.e., Google and Microsoft. Thus, Buying CDW at a Forward P/E’21 of only 24x would also be a great idea.

 

All in all, all these five stocks are just a part of our “Unfold the 10 Charming US Stocks” seminar. For Bualuang Securities’ clients who are interested in further information, you can access to a full report of “10 Charming US Stocks Playbook”. Furthermore, we provide a full video on YouTube (Click…https://youtu.be/XiMRLizuH2k) and iChannel for investors who prefer watching and listening along. We hope you enjoy reading this article!

 

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