Special Report – Not Your Grandpa’s Bank

Backdoor play on technology, payments and... trucking (yes, trucking)

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Back when I was working in my last gig, I was hunting for a new long idea…

In the process of doing the research on what I was sure would be the one, something better came along.

Not that the original idea didn’t seem good. Cass Information Systems ($CASS) owns a bank in Missouri, but its real business is paying freight and other corporate expenses such as utilities, telecommunications, and waste management for other companies. In other words, good old-fashioned (and extremely boring) payment and information process outsourcing.

Cass is so plugged into the world of freight and shippers that its monthly Cass Freight Index, as obscure as it may seem, is considered one of the most reliable indicators of inflation and future economic activity.

Through its bank, Cass also makes loans, with a specialty in lending to privately held businesses, restaurant franchises and “faith-based” ministries. That niche has proven to be so good that the company was expanding into the religious world via a recent acquisition of a developer of church management software.

To say Cass appeared to be conservatively run would be an understatement...

Management rarely gives interviews and doesn't hold earnings calls. And it doesn't really seem to care what Wall Street thinks. That's something I'm always a sucker for, since it suggests a company is more interested in running its business than its stock. In theory, if you do the former, the latter will follow.

What I really liked about Cass...

• It has been around... forever.
• It had a history of generating tremendous amount of cash.
• It has an excellent dividend history.
• It was a big leader in freight payments.
• It was a relatively unknown microcap, which I had been encouraged to seek out.

Armed with all that information, I started to dig into it...

‘There’s One Better’

One of the first calls I made was to Donald Broughton, who runs Broughton Capital... someone I consider to be a go-to on all things trucking and freight.

We started talking about Cass, and he mentioned that it's a good company and confirmed most of my observations, but also noted that it isn't terribly sophisticated when it comes to investors. In the next breath, with a hint of excitement, he said, "You know, there's one that's much better."

That’s exactly how I stumbled on ...

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