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September 29, 2014

Green Dot Corporation

Green Dot Corporation (GDOT) came up on a technical stock scan over the weekend, and after perusing their financials, I have decided to add a long position to the TrendBands Fund. Obviously, I am not performing the same depth of research as I would when managing real money, but I do like the profile numbers: The PEG ratio is below 1. Debt is very low. Insiders own over 20% of the company.

Their 9% ROE is a little low for a growth company, as is the 5% revenue growth, but both of these value metrics could increase substantially given the company's new partnership with Wal-Mart. The market seems to think so, as well, since this news produced a TrendBand breakout:

So now we just wait to see if the shares can set a trend. As the dominant player in the pre-paid card space, as measured by market share, GDOT is in a strong position to fend off competition, and the deal with Wal-Mart strengthens that position. A general market downturn is also a risk to just about any long position, but the pre-paid card business may actually prosper in a recession. So I am curious to see how this story plays out.

 

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