Chart of the Month (October 2023)

30 October 2023
Monthly Charts

Chart Description

The chart above shows the stock performance for TransUnion (TRU) from 1/1/22 to 10/26/23.
TransUnion is one of three main credit bureaus in the United States. The information that it collects and provides to banking institutions often serves as the basis for granting credit.
As you can see above, TRU has fallen over 60% since the start of 2022.
The stock fell 23% on Tuesday (10/24/23) after announcing Q3 earnings.

Our Take

The reason for the precipitous drop in the price of TRU over the last 22 months was outlined by the company’s CEO, Christopher Cartwright, on Tuesday during the TransUnion’s Q3 earnings call. He stated, “lending volumes in the US and UK softened progressively over Q3, causing our revenues to come in slightly under the low-end of our guidance”. Basically, TransUnion’s sales and profits have struggled in recent months as banks have tightened their lending standards and are less eager to make new loans. Mr. Cartwright went on to explain, “when you look at the performance of mid-market banks and smaller banks, the pinch on new credit origination is quite pronounced.” That is an ominous sign for the economy as it’s the smaller and regional banks that have traditionally provided credit to small businesses, which are the lifeblood of the US economy.

TransUnion’s recent performance seems to run counter to the consensus view of a healthy consumer, strong GDP growth and record low unemployment. TransUnion’s CEO addressed this in part by stating, “while US consumers continue to benefit from low unemployment and modest wage growth, lingering inflation and rising borrowing costs have taken a toll on household finances.” In our view, the consumer is not healthy. Many people are choking on higher prices, and while incomes have gone up over the last three years, for most people it is not nearly enough to make up for the rise in prices. The fact that inflation has moderated over the last year simply means that costs are rising less quickly, but they are certainly not headed in the opposite direction. The strong third quarter GDP reading is also not a signal to celebrate, in our opinion, as it is simply a reflection of an exploding fiscal deficit. The economy looks strong at the moment because we’re spending money that we don’t have. If we remain on the current trajectory, we believe that it won’t be too long before fiscal and monetary policy begin to restoke the inflationary fire.

The important message that we’ve gleaned from financial history is that by the time the headlines tell us we’re in a recession, it is already too late to adjust. Now is the time to be vigilant. Don’t chase yesterday’s winners, but rather stick to a disciplined, long-term strategy. We believe a patient investor will be rewarded with tremendous opportunities in the months and years ahead.

JPS Financial, LLC is registered as an investment adviser with the SEC. All information is believed to be current and should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. All investments and strategies have the potential for profit or loss.

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