Western Union: My Morning Pick

Good morning traders and investors,

Last week was horrendous if you were longing stocks, commodities, or futures. And this morning it does not look pretty. Stock futures and commodities are both trading lower. Go shorts. But I am not surprised. After all, October was a very bullish month so now its time for traders to double up and short.

With that said my morning pick is Western Union WU.

Morningstar's Wide Moat Focus Index lists Western Union highlighting their strong network and cost advantages. And analysts appear to like WU as 10 have rated the company as a Strong Buy. The shares have traded between $22.03 to $14.55 during the past 52 weeks. Its current price does not appear to have strayed too far from the company's earnings as its PE ratio is 10.6, indicating that the share price is not fully appreciated. The company reported 40 cents per share as expected on 10/25/2011 and have beaten EPS consensus in 4 of the last 6 quarters. WU currently earns $1.49 (ttm) for every $0.30 it pays out in dividends for a dividend cover of 5:1. Not bad but 10:1 would be better. Current ratio is 1.43 and its debt equity ratio is 7.94 according to Morningstar. These ratio's will prevent the stock price from reaching its maximum market value as indicated by its muted book value of $0.78. Nevertheless, Western Union's industry growth, opportunities, and its competitive advantages position the firm for robust long-term success.

Based on a 6 month chart, WU is now trading below a key support level of $16.41 and now looks to $16.13. That does not change much if you switch to a 1 year chart so look for a bounce of this support level; and thus, this may be a good a time to enter Western Union.

While the price has retraced since early November, like most stocks, trading favors for WU to reverse course and head north with little resistance until you reach $19.51. If that's the case then use your moving averages to guide your travels until you reach your destination.

Good luck traders and investors.

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