What Nick Stock Cafe said in this video:
- OtherneutralExperian is one of the three major credit bureaus. Like EFX and TransUnion, it faces regulatory risk from the potential shift from tri-merge to bi-merge, which could break their joint monopoly and force competition.Source
- OtherneutralTransUnion is one of the three major credit bureaus and, like EFX and Experian, may lose its protected triopoly if the US adopts bi-merge, exposing it to price and market-share competition.Source
- EFXneutralEFX and two other credit bureaus created VantageScore, and the government now requires mortgage buyers to accept it, which seems positive. However, to compete with FICO, VantageScore is priced extremely cheap with little profit. Additionally, the US federal housing director is considering replacing tri-merge with bi-merge, which would force the three bureaus to compete. As a result, EFX stock fell 6% despite the seemingly good news.Source
- Otherneutralmid-termThe US government has required mortgage buyers to accept VantageScore and is considering moving from tri-merge to bi-merge credit reports. This breaks FICO's 30-year monopoly and also attacks the credit bureaus' triopoly, changing the competitive story in the mortgage credit scoring market.Source
- FICObullishlong-termFICO enjoyed a 30-year regulatory-protected monopoly. Although new rules require Fannie Mae and Freddie Mac to accept rival scores, breaking the monopoly story, its scoring model remains more predictive than competitors, and strong pricing power drives high revenue and EPS growth. On DCF and P/E, the stock has fallen to a decade-low valuation and looks massively undervalued. The host personally believes the company can defend its market and will be fine, but because he dislikes market-share-loss risk and is trimming his number of holdings, he is currently waiting and not buying.Source