Seth Klarman attributes these are the characteristics of successful investors.
- They are unemotional, allowing the greed and fear of others to play into their hands.
- They have confidence in their own analysis and judgement and respond to market movements with reason.
- They demonstrate caution in frothy markets and conviction in panicky ones.
- They see market prices and fluctuations as opportunities taking advantage of Mr. Market’s erratic behavior.
- They know that the markets aren’t efficient and above average returns can be reached.
- They clearly distinguish stock price fluctuations from underlying business reality.
- Value in relation to price determines their investing decisions.
- They think the stock market is a vehicle to invest capital in and earn a decent return.
- They allow returns to compound over time.
Unsuccessful investors have the opposite characteristics:
- They believe the market is efficient and cannot be beaten.
- They look to Mr. Market for guidance – sell low, i.e. when prices went already down, and buy high, i.e. when prices went already significantly up.
- They focus on what the market is doing rather than look at what is happening with underlying fundamentals.
- They panic when prices fall instead of buying more if a security was a good buy in the first place.
- They think that if market prices are falling, the business must be doing badly.
- They let emotions guide their investment decisions and respond to market fluctuations with greed and fear.
- They take years of hard work to save but take only a few minutes to make an investment decision.
- They seek shortcuts to investment success.
- They constantly revise assumptions in order to justify higher prices.
- They pour money into stocks just because bonds have low yields.
- They seek simple investment formulas, usually by projecting the recent past into the future.
- They project their most recent personal experiences into the future.
The payments giant posted a solid fourth quarter, with revenue and non-GAAP EPS each up 17% from last year's levels. PayPal ended the year with 197 million users (up 10%) and improved engagement, as the number of payment transactions and total payment volume increased 23% and 22%, respectively, in the fourth quarter, and 24% and 26% for the full year. But while those stats are impressive, we agree with CEO Dan Schulman's statement that PayPal is "just scratching the surface" of the market opportunities that lie ahead.
PayPal is well positioned to benefit from increasing consumer adoption of mobile payments. The company processed more than $100 billion of mobile payments during 2016 (up 55%), and more than half of those who used the PayPal platform did so via their mobile device. This makes PayPal a powerful partner for merchants around the world as they move toward a multichannel business model. PayPal's One Touch functionality enables users to check out quickly and securely at over 5 million merchants. According to CEO Schulman, One Touch has an 87% conversion rate on mobile (turning site browsers into buyers), compared with an industry average of just 44%!
PayPal's transaction margins continued to decrease thanks to a mix shift toward lower-margin products including Venmo and Braintree, but the company did a nice job of offsetting this effect by controlling operating expenses. I believe there is plenty of opportunity for margin expansion in the coming years as payment volumes increase and the company begins to enjoy the benefits of scale.