Last week I published Part 1 of my Methods To My Madness series where I described the basic strategies I use when investing in the speculative side of my portfolio. Today, I dive into the second pillar, Transaction Processing. This pillar has three categories broadly identified as, Payroll/FSA, Financial and Stock/Portfolio. Most of these companies pay dividends, although a few do not. The ones that don’t at least have the potential to grow into dividend payers or be acquired.
The first segment has as its’ core the philosophy of using others money - or at least the float - for profit. The obvious entries are ADP and PAYX. Not so obvious are Webster, UMB Financial, Health Equity, UnitedHealth and Xerox. Each of these companies operate Health Savings/ Flexible Spending Plans. Although I placed Xerox in this category, they could also reside in Financial as well with their road tolling business. Recently, activists have appeared on the scene at both Webster and Xerox.
The next category basically gets a cut of the action. They skim a fraction from each transaction. The larger their market share, the more they make (in theory).
Finally we have the companies that get a piece of your investing activity. From stocks to mutual funds and ETFs, they get you coming and going. When you buy or sell, win or lose, these transfer agents get paid.
The companies surrounded by parentheses are ones on my watchlist - the others I currently own.
Total System Services Inc.
UnitedHealth Group Inc.
Bank of NY Mellon
Green Dot Corp
Absent are probably several but notably Samsung’s newest effort. Paypal also has a toe in the water with CurrentC through its Paydiant acquisition.