When I appeared as a guest on the Fox Business Network the other week, I was asked my thoughts on the credit card Apple Inc. (Nasdaq:AAPL) will soon launch.
I can see why host Connell McShane was interested. After all, Apple is joining forces with two global powerhouses.
MasterCard Inc. (NYSE:MA) is a tech-savvy leader in processing credit card transactions. And Goldman Sachs ranks as one of Wall Street’s top investment banking firms.
More to the point, the new Apple card should be a hit with the key demographic group from 18 to 34. These are mobile-centric consumers who are used to shopping, investing, ordering rides and food, and sharing photos right from their smart phones.
Apple is onto something big here. I believe “Generation M” – my term for young folks who seem to have been born with cell phones in hand – will find this wildly appealing.
But as much as I like Apple’s new product, I think there is a better way to capture the full upside that mobile commerce offers.
It’s an investment that’s nearly doubled the market’s returns so far this year. And it faces plenty of upside ahead…
Apple’s Next Moves
Don’t get me wrong. I’m in no way backing off my years-long support of Apple. I still think it’s the best unified computing company on the planet.
All of its products work well with each other, and also can access any amount of data, music, photos and more via the firm’s iCloud management system.
But CEO Tim Cook knows full well that the company must move beyond its reliance on the iPhone to carry the day for sales and earnings.
That’s why he has spent so much time revamping the operations to make the firm much more of a services play.
Consider that back in 2012, Apple basically had zero revenue from services. Today, that unit does around $40 billion in yearly, high-margin sales.
Indeed, the credit card was one of several new offerings that Cook outlined at its showcase event at the company’s headquarters.
The others are a new Apple TV subscription service for online streaming, a bundled news platform with 300 publications, and a mobile gaming service known as Apple Arcade.
I believe they will all be big hits. However, speaking as the father of two Generation M daughters, the new credit card has the potential to improve the financial lives of young adults.
It’s certainly cost effective. Apple says the card has no fees of any kind – that includes late fees, international fees or annual fees.
Even better than the cash young people will get back for using the card tied to Apple Pay, is the fact that it will allow them to manage their spending habits right from the Wallet app.
But here’s the thing. As important as the mobile-related credit card will become, my gut tells me it will likely never be more than 5% of Apple’s overall sales.
What we’re looking for in a case like this is a way to profit directly from the growth in m-commerce, as the field is known. BI Intelligence forecasts the sector will be worth roughly $284 billion by the end of next year, and account for nearly half of all e-commerce transactions.
That’s why I believe the ETFMG Prime Mobile Payments ETF (NYSE:IPAY) is savvy way to invest in this growth sector.
What’s Under the Hood
Launched in July 2015, the fund is focused on a major growth platform that is sweeping the world as the mobile phone becomes not just a primary shopping means, but one for payments as well.
As you might expect, the ETF does hold several of the more traditional big payments firms. Its 38 stocks include American Express Co. (NYSE:AXP), MasterCard and Visa Inc. (NYSE:V), all of which have mobile offerings.
But IPAY goes well beyond the Big 3 credit cards companies. It owns firms at the leading edge of mobile commerce, and also gives us some global exposure.
Take a look:
- PayPal Holdings Inc. (Nasdaq:PYPL). This payment processor is a spinoff from eBay Inc. (Nasdaq:EBAY), and has been wildly successful on its own. Sales last year hit a record $15.5 billion as the firm added 39 million new accounts to reach 267 million. It also owns Venmo, a cash-sharing app very popular with young people. PayPal also has roughly 21 million merchant accounts.
- This fund also makes room for fintech upstarts such as Square Inc. (NYSE:SQ), which has boosted sales at an average 87% yearly clip over the past four years. Square has become a leading ally of small- and mid-sized businesses with its full-fledged mobile commerce platform that can process and track all of the sales, marketing, inventory and accounting tasks a firm must fulfill.
- Germany’s WireCard has also proven to be a key disruptor of mobile payment systems. The firm has secured a banking license, enabling it to issue virtual credit cards that are now a payment option offered by 29,000 firms, mostly in Europe. WireCard, thanks to a purchase of Citigroup Inc.’s (NYSE:C) Prepaid Card Services, has begun to build a growing presence in the U.S. as well.
- Brazil’s PagSeguro Digital Ltd. (NYSE:PAGS) is bringing the mobile payments revolution to Latin America’s largest economy. It was founded in 2006 as an online payment platform to provide digital payments infrastructure. The firm offers affordable, mobile-first solutions for merchants to accept payments and manage their cash through their digital systems, without the need for a bank account. It’s a great business model – the World Bank says Brazil has one of the world’s highest concentrations of mobile phone use.
Now then, IPAY sold off with the rest of the market last year. But since trading began in 2019, it’s up just shy of 22%. That means it has nearly doubled the S&P 500’s 12.1% return over the same period.
And I believe that trend will hold for the foreseeable future.
After all, IPAY is made up of the high-growth payments sector’s best performers. As such, it is tailor made for today’s digital shoppers – and the folks savvy enough to invest in the red-hot sector.
Since mobile phones aren’t going away any time soon, neither will the power of this ETF to improve your net worth.
Play the Markets, in 3-D
In the meantime, I highly recommend you check out the new technology that my colleague, Money Morning’s Chief Investment Strategist Keith Fitz-Gerald, has been using to set up 23 winning plays since Jan. 31.
See, at any given time, the supercomputers used by the big wigs on Wall Street are overbuying, overselling, and otherwise distorting a whole slew of everyday stock prices. But the price might just be an illusion.
That’s where Keith’s Arbitrage Detection Grid System comes into play. It not only shows you what a stock should be worth, but also when the market forces should kick in, the stock should jump, and huge profits are made.
His system uses complex algorithms and formulas, along with 3D heatmapping (like in the image on the left) to identify a stock’s “true price,” and guide folks to their shot a six-figure windfalls.
Cheers and good investing,
Michael A. Robinson