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Aside from selling options and generating weekly cashflow, my favorite way to invest is making swing trades. Finding great businesses who have sold off hard for whatever reason is the key. I like to purchase them when they make it down to deep value territory. The stock I am writing about today is no stranger to us at OPG. Let's jump right into the breakdown:
The stock I believe is of absolute value right now is PayPal (PYPL)
PYPL currently trades at $58.77 per share.
Let me share a few reasons why I love PYPL at this price point:
1) Valuation - Paypal is very cheap right now. The risk/reward of buying at these levels is really great in my opinion. PYPL is trading at around 12 times forward earnings and around a 15.5 P/E Ratio. These are dirt cheap prices. However, it is important to make sure we are purchasing a value opportunity and not a value trap. Let's did a little deeper. PYPL has also approved a massive share buyback program. They could purchase upwards of 15% of the available shares off the open market with this plan. That shows that management also believes that the stock is cheap and is willing to put their money up to maximize shareholder value and reduce share count. PYPL also has a phenomenal balance sheet with a net cash position of $6 billion. Lastly, PYPL generated $4.2 billion in free cash flow in 2023 alone. Yes, in theory, any stock can go to 0. However, I think there is a limited downside with PYPL and a nice potential upside just based on these numbers alone and a few other things I'll share in the other points below
2) Narrative - It's no secret that PYPL stock has been a disaster the past 3 years or so. It has fallen from highs of over $300 per share to where it sits today. The business has certainly had it's fair share of issues as well. PYPL's new CEO just started and is looking to bring a much needed breath of fresh air into the company and the stock. The market reacted less than stellar during the most recent earnings call where he cautioned that the turnaround could take a few quarters to really see it show up in the numbers. Personally, I like the approach he took with this. Any slight glimmer of numbers improving prematurely will likely send the stock moving up fast. I've watched this scenario play out time and time again with high quality stocks. Remember when Zuck and META were the dog of the market? The stock sold off to $88 per share and 18 quick months later it's trading at $475 per share. How about when Elon and TSLA were a mess? The stock went to $101 per share and snapped back to $290 in less than a year. Need one more for good measure? This time last year Google was trading at $87. I just sold my shares a year later at $150. What does all that mean? My favorite time to buy is when the bears are the loudest and the narrative is about as bad as it gets. You just want to be sure the financials of said business are solid. PayPal has great numbers.
3) TPV - Total Payment Volume came in up 13% in 2023 to $1.5 TRILLION dollars. Once again, we have to separate narratives and facts. The fact is that PayPal is processing record amounts of payments right now despite some folks believing they are irrelevant. The fact that PYPL is still growing TPV by double figure % is impressive to me. How long can they keep it up? I'm not sure. But for now, I am impressed by the growth and believe it continues into the near term.
All in all I like this as an investment with limited downside but nice upside. These are my favorite type of swing positions as I am more than happy to sit back and give this time to play out. It could take a few quarters but I like the prospects here.
Happy to answer questions in the chat!
-Caleb
