We’ve been talking a lot lately about focusing on special situations that can make us money almost regardless of what the stock market does.
When we look at some of the stock market indicators, they are showing us that there are things that need to be paid attention to. For example, the market cap to GDP ratio is at all-time highs and above where it was back in the late 1990s. It’s just ridiculously high and is definitely flashing red.
While this doesn’t mean that the markets are going to crash today, it is above where markets have crashed in the past. And many prominent investors think that forward returns for the broad stock market over the next seven to 10 years look pretty dismal.
Therefore, we need to look for high quality special situations, including busted SPACs or IPO spinoffs, mergers, activist activity in small banks or other corporate events, that are going to make the stock shares worth a lot more than they’re trading for today.
And I’ve come across one of those situations this week that is absolutely fascinating. It’s Getnet Adquirencia (GET), which was spun off from the Brazilian bank, Banco Santander (Brasil) S.A. (BSBR). This just happened last week, and after the spinoff, the Brazilian bank is pretty much out of the picture.
They’ll be owned by the Spanish parent company as part of the reorganization of Banco Santander in Spain that’s taking place to streamline the bank and get it back on track as the region starts to recover from the pandemic. The bank is well positioned, but they wanted to get all of their payment programs in one division, and that it pretty much what they’ve done.
But the bank shareholders of Banco Santander (Brasil) S.A. that got the spinoff wanted to own the bank and didn’t particularly want to own this payments division. So, they’ve sold off the stock and the US-listed ADRs rather aggressively. Getnet Adquirencia (GET) came out trading around $3.60-$3.70 a share, and it’s now under $2.00. The stock has just been sold off way too fast.
Now, the company is doing a lot of things that I like, including offering a digital platform that will include mobile point of sales processing, which is a very high-growth business. They’ve also got an online e-commerce business that works with social media, and they’ve bought 60% of iMobile, which makes software packages that includes things that make businesses more productive.
So, they should become a digital leader, and they’re going to form a division called Getnet SCD, which will be a lender offering loans and financing through a digital application in the Brazilian markets. And here’s a big truth about Brazil that everyone seems to forget… That economy is based almost entirely on commodities, and commodities have been booming.
As long as we have inflation, they could continue to boom, and that could create a case where inflation actually yanks Brazil up by its bootstraps and gets the economy humming along again. That would be very good for the new Getnet lending app.
When I look at who they’re selling to, I get even more excited. Their large company business is pretty flat, and their small company business is growing at about 21% a year, but what’s really exciting is that their micro-entrepreneur business has been growing by 132% a year over the last three years and is showing signs of accelerating.
There’s a lot going on in the payments market, and Getnet is going to be a part of some of the most exciting, fastest-growing businesses in the world today. And with the stock down so much because of the spinoff, I think there’s an opportunity to get into Getnet Adquirencia here and ride it back to the initial price and possibly even higher.
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