Here's Why China Concessions On Trade Are Big Wins

&l;p&g;There has been a lot of attention over the past week on China and trade relations.

China has moved&a;nbsp;&l;strong&g;down&l;/strong&g;&a;nbsp;tariffs on auto and auto parts imports. And a source this past week said the government has &a;ldquo;encouraged&a;rdquo; China&a;rsquo;s largest oil refiner to buy more U.S. crude oil. Based on the reports, China is now taking about&a;nbsp;&l;strong&g;8 times&l;/strong&g;&a;nbsp;the daily volume of U.S. crude imports, compared to averages a few months ago.

These are concessions! This is a distinct power shift. Not long ago, the world was afraid to rattle the cage of China. They (global trading partners) tiptoed around touchy matters like Chinese currency manipulation&a;nbsp;&l;strong&g;prior&l;/strong&g;&a;nbsp;to the global financial crisis a decade ago, and even more so&a;nbsp;&l;strong&g;after&l;/strong&g;&a;nbsp;the crisis.

But now, you can see the leverage that has been created by Trump. This is exactly what we talked about the day after the election.

&l;a href=&q;https://esp.forbes.com/subscribe?PC=F5&a;amp;PK=R8526&a;amp;mkt_tok=eyJpIjoiTmpZd1l6UTNZV1ZsWWpVeSIsInQiOiIzY1c2MXFET3ZYZUI2c1BrQ1RvQWxmR1NYVnljajZFY2dTbFY3RzJvd2xSNnpnMmVtTmxoXC83RlppQnhFXC9WQ3pOeGh1eStrNnN0XC9veUcyb0EzaFwvS0IyNnVPNHFHa1VHSmVrSkk3YVJkUnp0ZG14aFJ5TG83dWxCbmpzNGFhRVoifQ%3D%3D&q; target=&q;_blank&q;&g;Special Memorial Day Offer: One Month Free Of Forbes Billionaire&s;s Portfolio&l;/a&g;

Here&a;rsquo;s an excerpt from my November 9, 2016&a;nbsp;&l;em&g;&l;span class=&q;il&q;&g;Pro&l;/span&g;&a;nbsp;&l;span class=&q;il&q;&g;Perspectives&l;/span&g;&a;nbsp;&l;/em&g;note, back when the experts were predicting Draconian outcomes for poking the China giant: &a;ldquo;As we&a;rsquo;ve seen with Grexit and Brexit, the votes came with dire warnings, but have resulted in creating&a;nbsp;&l;strong&g;leverage&l;/strong&g;. Trump&a;rsquo;s complaints about China are right. And a threat of slapping a tariff on Chinese goods creates&a;nbsp;&l;strong&g;leverage&l;/strong&g;&a;nbsp;from which to negotiate.&a;rdquo;

Now, we have an economy that is leading the global economic recovery. China wants and needs to be part of it. And we have a President that has a loud bark, and the credibility to bite. And that is creating movement. Let&a;rsquo;s revisit, also from one of my 2016 notes, why this China negotiation is so important &a;hellip;

&l;em&g;TUESDAY, SEPTEMBER 27, 2016&l;/em&g;

&l;em&g;China&a;rsquo;s biggest and most effective tool is and always has been its currency. China ascended to the second largest economy in the world over the past two decades by massively devaluing its currency, and then pegging it at ultra-cheap levels.&l;/em&g;

&l;em&g;Take a look at this chart &a;hellip;&l;/em&g;

&l;em&g;&l;img class=&q;CToWUd a6T&q; src=&q;https://blogger.googleusercontent.com/img/proxy/AVvXsEijaAR6Juy2OrFJiczssEGqi2tv50YUoGpfoUD6WuNcJVMa0WNSQD5xXEXzXPcV8S4g49ykSAO0-J18D3mDqklQQ_AZJplhudHovL_lSvv3y58P5-oL52MFCdmPxJojz6ScaUubW0uQWsx8-Klv5ViMwTbgPYRQCCQPVDdqE5ZFDBQjq_o=s0-d-e1-ft&q; alt=&q;&q; border=&q;0&q; data-height=&q;244&q; data-width=&q;420&q;&g;&l;/em&g;

&l;em&g;In this chart, the rising line represents a weaker Chinese yuan and a stronger U.S. dollar. You can see from the early 1980s to the mid-1990s, the value of the yuan declined dramatically, an&a;nbsp;&l;strong&g;82% decline against the dollar&l;/strong&g;. China trashed its currency for economic advantage&a;mdash;and it worked, big time. And it worked because the rest of the world stood by and let it happen.&l;/em&g;

&l;em&g;For the next decade, the Chinese pegged its currency against the dollar at 8.29 yuan per dollar (a dollar buys 8.29 yuan).&l;/em&g;

&l;em&g;With the massive devaluation of the 1980s into the early 1990s, and then the peg through 2005, the Chinese economy exploded in size. It enabled China to corner the world&a;rsquo;s export market, and suck jobs and foreign currency out of the developed world. This is precisely what Donald Trumpis alluding to when he says &a;lsquo;China is stealing from us.&a;rsquo;&l;/em&g;

&l;em&g;China&a;rsquo;s economy went from $350 billion to $3.5 trillion through 2005, making it the third largest economy in the world.&l;/em&g;

&l;em&g;&l;img class=&q;CToWUd a6T&q; src=&q;https://blogger.googleusercontent.com/img/proxy/AVvXsEhVU99xzFPEFv3F89BcLeAarF5py0xmwVU-PZqatEofOqc9b0XddFQWvBIYrp8ClLwQvXJEqGet3Nus-2BBG4yFQj-VIggPidw_TsEnfVcWxwpksbuQsGdiY7-wv7JBkUp5hWBpKpT6d1T6xAe8_0UdTr6t113xo-KRXGZUQvQGLWnwQ1E=s0-d-e1-ft&q; alt=&q;&q; border=&q;0&q; data-height=&q;244&q; data-width=&q;420&q;&g;&l;/em&g;

&l;em&g;This next chart is U.S. GDP during the same period. You can see the incredible ground gained by the Chinese on the U.S. through this period of mass currency manipulation.&l;/em&g;

&l;em&g;&l;img class=&q;CToWUd a6T&q; src=&q;https://blogger.googleusercontent.com/img/proxy/AVvXsEjGGiGhnNPIP0pWMUuyt4X3usCexcb_P8j0dRyd7W3YLEwXRTNhcLlyfhqMjyR-OMn_pjNFdF_RVvf4hqDhhNmr8tpN3ZOAwISjqPrFdOBEowBuGJ6rqLkcKGxK7Qcw-pUKlHre_OBusJJq-Z8BZfpfcUo9Gutjue6OboUFOVP8XyuZDns=s0-d-e1-ft&q; alt=&q;&q; border=&q;0&q; data-height=&q;244&q; data-width=&q;420&q;&g;&l;/em&g;

&l;em&g;And because they&a;rsquo;ve undercut the world on price, they&a;rsquo;ve become the world&a;rsquo;s Wal-Mart (sellers to everyone) and have accumulated a mountain for foreign currency as a result. China is the holder of the largest foreign currency reserves in the world, at more than $3 trillion dollars (mostly U.S. dollars). What do they do with those dollars? They buy U.S. Treasurys, keeping rates low, so that U.S. consumers can borrow cheap and buy more of their goods&a;mdash;adding to their mountain of currency reserves, adding to their wealth and depleting the U.S. of wealth (and the cycle continues).&l;/em&g;

&l;em&g;This is the recipe for big trade imbalances &a;mdash; lopsided economies too dependent upon either exports or imports. And it&a;rsquo;s the recipe for more cycles of booms and busts &a;hellip; and with greater frequency.&a;rdquo;&l;/em&g;

Again, China has to be dealt with. And we&a;rsquo;re starting to see signs of progress on that front. Good news.

&l;em&g;If you are hunting for the right stocks to buy and need some help navigating the changing investing environment,&l;span&g;&a;nbsp;&l;/span&g;&l;strong&g;&l;span&g;&l;a id=&q;m_-4108105136262460751&q; href=&q;http://pages.forbes.com/o03DB00NS00vkS1aDVNjtD2&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;join me&l;/a&g;&l;/span&g;&l;/strong&g;&l;span&g;&a;nbsp;&l;/span&g;in my&l;strong&g;&l;span&g;&a;nbsp;&l;/span&g;Forbes Billionaire&s;s Portfolio&l;/strong&g;.&a;nbsp;&l;span&g;We&l;/span&g;&l;span&g;&a;nbsp;have a roster of 20 billionaire-owned stocks that are positioned to be among the biggest winners as the market recovers.&a;nbsp;&l;/span&g;&l;/em&g;

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QIWI: Strong Leadership In The Online Payments Market In Russia

QIWI (QIWI) is the leader in the online payments market in Russia. The markets in which the company is present show growth, and this growth could affect QIWI's profits and dividends and, as a result, return the attractiveness among investors. This article is about why QIWI is an excellent investment right now.

About the company

QIWI - online payment service, the analog of PayPal (PYPL). In 2008, the company launched its main project - QIWI Wallet, and, already in 2013, held an IPO on the Nasdaq.

In 2016-2017, QIWI launched the installment card "Sovest" and acquired the banking brands "Tochka" and "Roketbank", specializing in small and medium-sized businesses. Now, QIWI positions itself as one of the leading FinTech companies in Russia.

Source: QIWI presentation

The company's CEO is Sergey Solonin, one of the most active figures in the Russian FinTech. Solonin also holds the post of chairman of the FinTech committee under the government of Russia.

The volume of payments through the QIWI system amounted to more than 900 billion rubles. QIWI service is at least once per month used by more than 50 million people. In 2017, QIWI Wallet active accounts increased by 17% to 20.1 million.

Financials

QIWI's revenue has been growing steadily since the IPO. Net profit also increased along with revenue until 2017. In 2017, the net profit of the company significantly decreased and returned to the level of 2015, which greatly frightened investors.

The main reason for the decline in profits was the investment in the project "Sovest" and the acquisition of two banking brands - "Roketbank" and "Tochka".

QIWI does not use borrowed funds and even maintains a fairly large cash position.

Source: YCharts, picture by the author

Growth drivers

The key growth driver for the company will be the very rapid growth of online payments and e-commerce markets in Russia. In Russia, compared to other countries, there is still a low penetration rate of smartphones, as well as a small proportion of transactions in the e-commerce segment.

QIWI as a payment service affects many markets, including the self-employed market and sharing economy. For example, self-employed in Russia mainly uses QIWI as the main platform for most operations related to work activities. QIWI also leads the market in the sharing economy in Russia. Most companies that are part of the sharing economy, including Uber (UBER) and Airbnb (AIRB), use QIWI for money transactions in Russia. Drivers in Uber and landowners in Airbnb receive their income through the QIWI system.

Another driver for the company should be a partnership with bookmakers. This is also a fairly large market in Russia, especially due to the fact that in Russia in 2018 will host the World Cup. In accordance with Russian law, any person who wants to register at a bookmaker should first open QIWI Wallet for identification.

Source: QIWI presentation

Last year, QIWI launched the project "Sovest" - an installment card. It expects a huge growth rate, as there is practically no competition in this market, and reducing the key interest rate will increase the debt load of Russians, which now remains at an extremely low level. The main risk for the project this year will be the entry of the largest banks into this market, which will slightly squeeze the position of QIWI. But, at the moment, by the number of active clients, the project "Sovest" remains in the first place in Russia.

The "Tochka" brand, which QIWI bought last year, is a multi-bank platform and allows customers to combine several accounts of different banks in one app. That's why "Tochka" is looking for its clients among small and medium-sized businesses in Russia, for which there is not yet a universal banking solution in the current market.

The interesting news was that, in 2017, the Central Bank of Russia, through the bank "Otkritie", conducted a purchase of shares of QIWI. One of the reasons for this may be the possible launch of the Russian state cryptocurrency. For more details, I recommend reading this article.

As for the forecasts for the next two years, I assume that revenues will continue to grow at an accelerated pace, as the markets in which QIWI is present will grow by 20% + annually. In the coming years, the company expects revenue growth of at least 15-20% per year. 2018 should be final in terms of high investment for new projects, and, in 2019, I expect the return of marginality to the levels of 2015-2016, which will allow it to receive more than 6 billion rubles of net profit.

Valuation

Currently, the company is strongly undervalued against its historical multiples and competitors. The P/E multiplier with the earnings for 2017 is below the average P/E for 5 years by 19%. Competitors of QIWI, operating in the market of online payments in the face of Square (SQ) and PayPal, are traded with forward P/E multipliers more than 100x and 30x, respectively, whereas forward P/E for QIWI is only 11x.

In conclusion, I want to say that the decrease in net profit was temporary and is connected with investments in very ambitious projects that will allow the company to grow by double-digit growth rates and starting from 2019 to return to dividend payments. Let me remind you that, in recent years, QIWI paid good dividends to its shareholders with an average yield of 4-5%. That's why I think QIWI is an excellent investment at current prices.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

With Its iZettle Acquisition, PayPal Gains a Massive International Opportunity

PayPal (NASDAQ:PYPL) has confirmed it is taking its biggest step to date to expand its growing payments empire. The company said it will spend $2.2 billion to buy iZettle, a small-business tools and payments provider that has been called the "Square of Europe."�

The company's devices and platform are being used by an estimated 500,000 businesses in Europe and the Americas. This will help PayPal expand into a number of markets where it has little or no presence, while also giving the company a way into hundreds of thousands of physical stores and smaller brick-and-mortar retailers worldwide.�

This will also put PayPal on a collision course with Square Inc. (NYSE:SQ), the incumbent payment system used by many small businesses.

New partners: from left, Jacob de Geer, CEO and co-founder of iZettle; Dan Schulman, president and CEO of PayPal; and Bill Ready, executive vice-president and CEO of PayPal. Image source: PayPal.

No, not a new product from Cupertino

Currently, iZettle operates in 12 markets: Brazil, Denmark, Finland, France, Germany, Italy, Mexico, Netherlands, Norway, Spain, Sweden, and the U.K. (an �an area of great interest to Square where iZettle has a very substantial presence).

According to iZettle's website, the company offers a variety of tools to help small businesses: "We offer a range of payment and commerce solutions that used to be reserved for the big players -- like lightning-fast mobile card readers, intuitive point-of-sale systems, invoicing software, business funding and a site full of smart analytics so you can evaluate your output and keep getting better."�

The fintech start-up had filed for an IPO earlier this month, hoping to raise an estimated $227 million, valuing iZettle at about $1.1 billion. The company planned to use the funds to expand. Initially, co-founder Jacob de Geer said the company wasn't interested in being acquired, but reconsidered after a meeting with PayPal executives.�

This acquisition will put PayPal in direct competition with Square, which began life as a way for small business to process payments using its namesake device and a smartphone. The company later expanded to offer point-of-sale and payroll services and working capital loans. Square has also been aggressively expanding in the U.K.

The buyout will be PayPal's largest ever. The company acquired money transfer service Xoom for around $890 million in 2015, and bought out Braintree in 2013 for about $800 million to get its hands on Venmo.

iZettle helps 500,000 merchants worldwide. Image source: iZettle.

PayPal's jewel

The acquisition of Venmo has been particularly successful, and PayPal has called Venmo its "crown jewel." The social payments platform has been especially popular with millennials for sending money to friends, and as a way of splitting charges at restaurants or for paying rent. The platform processed more than $40 billion in payments over the trailing 12-month period. In the first quarter, Venmo generated payments of $12 billion, up 80% year over year, and added more new users than in any previous quarter.

It's important to note that PayPal has only just begun a move to profit from the app, which is free for consumers to use. The company recently launched Pay With Venmo, which allows users to pay merchants using the app anywhere PayPal is accepted. The company will generate revenue from the processing fees it charges merchants.

A match made in heaven

PayPal CEO Dan Schulman said: "iZettle and PayPal are a strategic fit, with a shared mission, values and culture -- and complementary product offerings and geographies. With nearly half a million merchants on their platform, Jacob de Geer and his team add best-in-class capabilities and talent that will expand PayPal's market opportunity to be a global one-stop solution for omni-channel commerce."�

PayPal expects the deal to close in the third quarter. Forecasts by iZettle call for revenue of $165 million this year, driven by $6 billion in total payment volume. While the company is not yet profitable, it expects to reach EBITDA profitability by 2020. PayPal said the deal will be dilutive to its full year 2018 non-GAAP earnings by $0.01 per share.

LSV Asset Management Cuts Holdings in Sandy Spring Bancorp Inc. (SASR)

LSV Asset Management cut its stake in shares of Sandy Spring Bancorp Inc. (NASDAQ:SASR) by 3.4% in the 1st quarter, Holdings Channel reports. The fund owned 92,100 shares of the bank’s stock after selling 3,200 shares during the quarter. LSV Asset Management’s holdings in Sandy Spring Bancorp were worth $3,569,000 as of its most recent filing with the Securities & Exchange Commission.

Other hedge funds also recently modified their holdings of the company. Basswood Capital Management L.L.C. raised its position in shares of Sandy Spring Bancorp by 252.3% in the fourth quarter. Basswood Capital Management L.L.C. now owns 476,689 shares of the bank’s stock valued at $18,600,000 after buying an additional 341,371 shares in the last quarter. Maltese Capital Management LLC acquired a new stake in shares of Sandy Spring Bancorp in the fourth quarter valued at approximately $3,906,000. BlackRock Inc. raised its position in shares of Sandy Spring Bancorp by 4.6% in the fourth quarter. BlackRock Inc. now owns 2,156,143 shares of the bank’s stock valued at $84,134,000 after buying an additional 95,615 shares in the last quarter. Bronfman E.L. Rothschild L.P. raised its position in shares of Sandy Spring Bancorp by 2,418.6% in the first quarter. Bronfman E.L. Rothschild L.P. now owns 83,542 shares of the bank’s stock valued at $3,238,000 after buying an additional 80,225 shares in the last quarter. Finally, Geode Capital Management LLC raised its position in shares of Sandy Spring Bancorp by 26.2% in the fourth quarter. Geode Capital Management LLC now owns 354,643 shares of the bank’s stock valued at $13,838,000 after buying an additional 73,688 shares in the last quarter. Hedge funds and other institutional investors own 66.03% of the company’s stock.

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A number of research firms have recently weighed in on SASR. Zacks Investment Research downgraded shares of Sandy Spring Bancorp from a “buy” rating to a “hold” rating in a research report on Wednesday, April 25th. Keefe, Bruyette & Woods upgraded shares of Sandy Spring Bancorp from a “market perform” rating to an “outperform” rating and set a $47.00 price target for the company in a research report on Tuesday, April 24th. ValuEngine cut shares of Sandy Spring Bancorp from a “hold” rating to a “sell” rating in a research note on Wednesday, May 2nd. BidaskClub cut shares of Sandy Spring Bancorp from a “sell” rating to a “strong sell” rating in a research note on Thursday, January 25th. Finally, Stephens raised shares of Sandy Spring Bancorp from an “equal weight” rating to an “overweight” rating and set a $45.00 price objective on the stock in a research note on Thursday, February 22nd. One investment analyst has rated the stock with a sell rating, four have assigned a hold rating and three have given a buy rating to the company. Sandy Spring Bancorp has a consensus rating of “Hold” and an average price target of $46.20.

In other Sandy Spring Bancorp news, Director Mark C. Michael sold 1,000 shares of the business’s stock in a transaction on Friday, May 18th. The shares were sold at an average price of $41.30, for a total transaction of $41,300.00. Following the sale, the director now owns 81,590 shares of the company’s stock, valued at $3,369,667. The transaction was disclosed in a legal filing with the SEC, which is accessible through this link. Also, Director Joseph S. Bracewell sold 50,000 shares of the business’s stock in a transaction on Monday, March 5th. The stock was sold at an average price of $39.21, for a total transaction of $1,960,500.00. Following the sale, the director now directly owns 42,173 shares in the company, valued at approximately $1,653,603.33. The disclosure for this sale can be found here. Insiders sold 90,400 shares of company stock worth $3,571,967 over the last three months. 3.31% of the stock is currently owned by insiders.

Shares of Sandy Spring Bancorp opened at $41.93 on Tuesday, Marketbeat Ratings reports. The company has a market capitalization of $1.47 billion, a P/E ratio of 16.51, a PEG ratio of 1.15 and a beta of 0.85. The company has a current ratio of 1.08, a quick ratio of 1.07 and a debt-to-equity ratio of 1.03. Sandy Spring Bancorp Inc. has a 1 year low of $36.41 and a 1 year high of $43.13.

Sandy Spring Bancorp (NASDAQ:SASR) last announced its quarterly earnings data on Thursday, April 19th. The bank reported $0.80 earnings per share (EPS) for the quarter, beating analysts’ consensus estimates of $0.75 by $0.05. The business had revenue of $81.03 million for the quarter, compared to analysts’ expectations of $78.10 million. Sandy Spring Bancorp had a net margin of 21.34% and a return on equity of 10.94%. The firm’s quarterly revenue was up 48.2% compared to the same quarter last year. During the same period last year, the firm posted $0.63 earnings per share. equities analysts predict that Sandy Spring Bancorp Inc. will post 3.25 EPS for the current fiscal year.

The company also recently disclosed a quarterly dividend, which was paid on Wednesday, May 16th. Investors of record on Wednesday, May 9th were paid a $0.28 dividend. This represents a $1.12 dividend on an annualized basis and a yield of 2.67%. This is a boost from Sandy Spring Bancorp’s previous quarterly dividend of $0.26. The ex-dividend date of this dividend was Tuesday, May 8th. Sandy Spring Bancorp’s dividend payout ratio (DPR) is 44.09%.

Sandy Spring Bancorp Profile

Sandy Spring Bancorp, Inc operates as the bank holding company for Sandy Spring Bank that provides commercial banking services to individuals and businesses in central Maryland, Northern Virginia, and Washington DC markets. It operates through three segments: Community Banking, Insurance, and Investment Management.

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