The Winklevoss twins of Facebook Inc (NASDAQ:FB) fame are looking to create a Bitcoin exchange traded fund (ETF). That’s a bad idea, particularly since the validity of the currency is questionable at best. Investors looking for money changers should consider The Western Union Company (NYSE:WU), Xoom Corp (NASDAQ:XOOM), and eBay Inc (NASDAQ:EBAY) instead.
Bitcoin is a “currency” that is used on the Internet and isn’t backed by any country or physical assets. Its only worth rests on Bitcoin holders’ belief in its legitimacy. That belief could be sorely tested if the government, any government, steps in and makes the “currency” illegal. That’s far more likely than many would like to believe.
Having an Internet currency is a great idea, but rife with risks. That the Winklevoss twins want to corner the market on Bitcoin and create an ETF looks more like grandstanding than a good investment choice. Don’t go along for the ride.
There are other companies that, without any question, help customers to legally move money around the world. The biggest and best known is The Western Union Company (NYSE:WU). The company has locations in more than 200 countries, so it is truly a global business. Moreover, it is working to provide more online services to customers and increase its role in the lives of the under-banked.
Notably, only 10% of its locations are in the United States. While immigrants sending money home to loved ones is an important part of the company’s business, it is increasingly providing services within the countries it serves. So, this isn’t The Western Union Company (NYSE:WU) of yesteryear, it’s one that’s becoming a global finance company specializing in legally moving cash around.
The Western Union Company (NYSE:WU)’s sales and earnings have picked up after falling during the 2007 to 2009 recession. However, problems in its U.S./Mexico business took earnings lower in 2012. The issues caused the stock to sell off and is likely to be a drag on revenues and earnings over the next 12 to 18 months. This drag, however, could make now a good time to jump aboard a money changer with a great brand name. The shares yield around 2.9%, and emerging market growth should be a notable catalyst.
Another global money changer worth a look, at least for more aggressive investors, is Xoom Corp (NASDAQ:XOOM). The company offers roughly similar money transfer services to The Western Union Company (NYSE:WU), but does it all online. Since the company doesn’t have any physical locations to support, there’s virtually no cost to adding new customers. Price is a big issue in the money transfer space, so being a low-cost provider makes it easier to take market share.
Also important to the company’s success is the increasing acceptance of the Internet as a safe place for doing business. Growing Internet access in emerging markets is an additional tailwind. And, early results suggest that customers like Xoom Corp (NASDAQ:XOOM). The company’s quarterly revenues have grown 50% over the last year. Even though that comes off of a small base, it shows that it is attracting customers quickly.
Aggressive growth investors should take a close look at Xoom Corp (NASDAQ:XOOM), noting that it has yet to turn a profit.