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PagSeguro Digital ltd (PAGS)

Paypal’s weak recent quarter forecasts led to a price correction down from $121 at the end of June to $112 today. There was never any dividend, the P/E remains a rich 50+. I sold out on July 25 at $116 and added to PagSeguro (PAGS) – currently up 10% at $47. Why a Brazilian Fintech company?

Credit first IBD which has consistently rated PAGS – currently a 99 A; no 3 in the top 50 and one of their select Global Top 10. That eventually caught my attention. As did the stats – ROE of 29%, Debt 0, EPS growth running at 35% per quarter. I bought when the P/E was 40, it is now 50 which is rich. So what else?

Fintech is the cutting edge of new banking – innovative, market focussed, and fast developing. Brazil is the largest economy in South America and one of the least well banked. PAGS now provides the whole nine yards, a completely integrated service tailor made for the small to mdium sized businesses which make up 99% of the economy, and trusted where the traditional banks are not. It is looking at growth rates of 30%+ with little competition.

Have a good day. James

James is advisor to theKing Group at Merrill Lynch.