Stop Worrying About Interest Rates: Here's Why

Stop worrying about interest rates. Seriously. Your attention should be elsewhere.

Apr 10, 2014 at 7:33AM

Source: Global Payments

There are a lot of investors very concerned about interest rates. Hank Boughner is not. And I think he's right.

Boughner is the head of Corporate Development and Mergers & Acquisitions at Global Payments (NYSE:GPN) and I listened to him speak at the payment technology conference, Transact 2014. 

In a panel on M&A opportunities in the payments industry, the panel members were asked about changes in the interest rate environment and how that would impact what they're looking to acquire and how much they're willing to pay.

"Growth will trump a lot of other issues," was Boughner's response.

Let's unpack that
Boughner was referring specifically to Global Payments and the transactions that he's looking at for the company.

Global Payments is a payment processor and merchant acquirer. That means the company is the enabler of credit card transactions for businesses. In the hugely important behind-the-scenes processing that happens between the time that a customer swipes a Visa (NYSE:V) or MasterCard (NYSE:MA) credit card, processors link the Visa/MasterCard networks to the business and to the banks that actually fund the transaction.


Source: Global Payments

So when Boughner talks about growth "trumping" other issues when it comes to making acquisitions, he's saying that he's not focused on the Federal Reserve and the day-to-day wiggles in interest rates. Instead, he's looking for smaller merchant acquirers and processors that have a head of steam in adding businesses customers, that have compelling technology, that have an established foothold in an industry niche.

In other words, he's focusing on finding businesses that are succeeding, not on interest rates.

To your bottom line
We -- Foolish investors -- should be thinking along the same lines as Boughner. 


Is Janet Yellen really going to hold growth back?

Interest rates are going to fluctuate. But trying to predict what's going to happen with rates in the near term is darn near impossible.

For proof of that, look no further than year-to-date 2014. With the Federal Reserve tapering its bond-buying programs, the broad expectation has been that interest rates would rise. They haven't. In fact, the 10-year Treasury started the year at 3%, and it's now at 2.69%.

This thought process -- focusing on business operations rather than rates and other macro trends -- works for thinking about Global Payments as an investment. It's grown its bottom line around 14% per year over the past decade. If you're considering investing in that company, do you worry about interest rate fluctuations? Or do you spend more time considering what continued growth in overseas e-commerce and credit/debit card payments could mean for Global Payments?

On the other end of the payment process, the same could be said for Visa and MasterCard. Do you focus on interest rates? Or the fact that, say, MasterCard's profit has more than doubled since 2009 and it's continuing to grow its global presence?

To me, it's really that simple: Understand what the impact of a changing interest rate environment means to your investments, but let business quality, not unpredictable rate movements, drive your investing process.

Prepare to profit from the changes in payment technology
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Matt Koppenheffer has no position in any stocks mentioned. The Motley Fool recommends MasterCard and Visa. The Motley Fool owns shares of MasterCard and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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