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The shares of Western Union (WU), which I first wrote about on July 9, 2009 at a price of $16.49, continue to veer lower, but the calculation is to stick with the trade, for the following reasons. The first is not that encouraging: WU is only about $1.50 above the $14 sell/stop loss, hence there's not much more downside, should the stock continue to dip.
Second, the stock has tested and held support at $15 on two occasions this spring, and shares had recovered earlier in the year to about $19, prior to the Dow's recent swoon.
Third, Western Union will likely post a 2-4% revenue gain for FY2010. The recession in construction work -- which has reduced day-labor demand for money transfer services -- appears to have ended, and the sector is gradually recovering, to WU's benefit. Finally, emerging markets, particularly those in Asia, offer considerable opportunities for WU.
The First Call FY2010/FY2011 EPS estimates for WU are $1.33 to $1.47.
2010 Outlook: I view Western Union as a long-term play, but if investors are looking to sell WU within the year, it's probably best to take your profits after it rises to $18-19, if it fails to clear $20.
Stock Analysis: I consider Western Union to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in WU now. Under any circumstance, I wouldn't buy more than 50% of my WU position before August 2010 and I'd put a sell/stop loss at: $14.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
The First Call FY2010/FY2011 EPS estimates for WU are $1.33 to $1.47.
2010 Outlook: I view Western Union as a long-term play, but if investors are looking to sell WU within the year, it's probably best to take your profits after it rises to $18-19, if it fails to clear $20.
Stock Analysis: I consider Western Union to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in WU now. Under any circumstance, I wouldn't buy more than 50% of my WU position before August 2010 and I'd put a sell/stop loss at: $14.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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