Western Union (NYS:WU) – mrkt cap $4.13B; Price $11.90; trailing P/E 5.0x
HOLD. We originally posted this as a tactical “buy” trade idea on 4/19. The stock popped today about 12% after earnings were announced and the company beat on both top and bottom line. We believe that WU will be a benefit from the thematic change of companies no longer being able to use ‘capital as a weapon’ as they did so freely in a ZIRP world. Profitable industry incumbents like WU that have been losing share to profitless competitors are discovering new advantages – being able to internally finance promotional activities and growth projects in the face of constrained competition. We believe Western Union will be able to increase share with their digital business as a result of their tech investments and promotional activities.
Tempur Sealy (NYS:TPX) — mrkt cap $6.3; Price $36.59; trailing P/E 14x
PASS. TPX manufactures and sells mattresses under the brands ‘Tempur Pedic, ‘Sealy’, and ‘Stearns and Foster’. Generally, this is a sleepy industry, however, competitive dynamics look to be swinging in TPX’s favor. TPX’s largest competitor, Serta, filed chapter 11 at the beginning of this year. Other competitors such as Purple and Casper are not faring much better. TPX is better capitalized and stands to gain share as bed purchases are driven by advertising budgets. It is trading at slightly higher multiples than we would like given the discretionary nature, pull forward in demand, and recessions risk. We will look to initiate a position in the event of a pullback.