Overall, nearly three-quarters of people who qualify for SNAP apply for benefits. Yet only one-third of the qualifying elderly apply for SNAP. The reasons for this are varied. Many people who are retired and collect Social Security assume they don’t qualify. The older generation also tends to assign more of a stigma to public assistance programs. But as more of their friends and family members participate in the program, baby boomers are starting to view SNAP as one more tool they can use to make ends meet.
The elderly are also the fastest-growing segment of the population. The number of those 60 years old or older will grow from 59.5 million in 2012 to 74.8 million in 2020.
Bob: There are only three companies involved in the administration of the EBT cards used for SNAP and other government assistance programs. You focused on the least well-known of the three. Who’s your pick, and why?
Amy: Both JPMorgan Chase & Co (NYSE:JPM) and Xerox Corporation (NYSE:XRX) administer EBT programs. But I chose Fidelity National Information Services (NYSE:FIS) because this business is right in its wheelhouse and it’s in a position to gain market share.
In its Sept. 2 issue, Forbes Magazine published a list of what it considers to be the world’s most innovative companies. Alongside tech giants such as Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) is Fidelity, the world’s largest provider of banking and payments technologies.
FIS currently has the smallest number of SNAP state contracts of the three providers. Most of these are legacy contracts that eFunds secured before it was acquired by Fidelity National Information Services (NYSE:FIS). But now as part of a larger corporate entity, Fidelity has the clout to be a bigger player, primarily at JPMorgan Chase & Co (NYSE:JPM)’s expense. For instance, on Sept. 16, FIS will start administering Florida’s SNAP program, which previously was a JPMorgan Chase & Co (NYSE:JPM) contract.
Bob: To what extent will the upcoming congressional debate over food-stamp allocations likely affect the participation or allocation rate — and, by extension, the fortunes of the companies involved in the administration of the program?
Amy: Companies that administer SNAP are affected more by the number of participants than the actual benefit amount. There are likely to be some eligibility cutbacks when the Farm Bill comes up for debate, primarily related to work requirements for working-age adults without children. But the potential participation impact from this change will be more than offset in the near future by the growing ranks of minimum wage workers and the elderly.
Actually the biggest legislative change that could reduce SNAP participation is an increase to the minimum wage. While that issue has been raised, it has yet to gain traction in Congress.
Bob: What else influenced your decision to go with Fidelity as your “stock of the month” for September?
Amy: I’ve been encouraged by recent economic data out of Europe. If Europe begins to stabilize, I think that will be a big plus for the global economy. That’s another reason why I think Fidelity is an appealing opportunity. Roughly 20% of Fidelity’s revenues come from its International Solutions Group, which provides banking and financial software and consulting services. Financial institutions in Germany, Brazil, the United Kingdom and India are Fidelity’s primary international customers.
Another trend I’ve been tracking is the growth of mobile banking. A recent study by Juniper Research projected 550 million people worldwide will use their smartphones for banking by 2016, up from 185 million in 2011. In March, Fidelity completed its acquisition of mFoundry, a company that specialized in mobile payment systems for financial institutions and retailers.
Fidelity has made a number of smart acquisitions of leading-edge payment processing companies. These technologies can now be better leveraged by Fidelity’s scale and reach.
Unlike other advisory services, I only profile one stock a month — the single best opportunity I can find. To qualify, I have to be convinced that a number of trends and factors are working together to produce returns that outperform the market. I believe that Fidelity has that potential.
P.S. — Amy Calistri dodged the 2008 financial collapse, and she says the market is again ripe for a pullback. This is the same analyst who’s produced annual returns of up to 510%, and has picked winning investments roughly 85% of the time. To learn how she’s protecting her portfolio today, click here.
The article How To Profit From ‘Food-Stamp Nation’ and is written by Bob Bogda.
