Avoiding the Institutional Imperative

“Faced with the choice between changing one’s mind and proving there is no need to do so, almost everyone gets busy on the proof.“ – John Kenneth Galbraith

We continue to experience a K-shaped recovery.  Many of us (and most likely those reading this post) live in a way that limits insight to the challenges that many still face.  A narrow segment of the population is flush with cash having had limited spending outlets over the past year. As vaccine roll out becomes more widespread and faster, mask mandates begin to be lifted. Consequently, local economies open and an accelerated return to normalcy takes place filled with individuals eager to repeat the “Roaring 20s.”  Conversely, another segment of the population is having an entirely different experience that isn’t part of the “roaring re-opening” narrative. 

Intelligent Systems (INS) – “Small and Focused Wins”

Sector:      Technology – Internet Services and Infrastructure

Price/Market Cap:   $40.71 / $362M

Target Price/Implied Upside: $92 / 125%

Thesis

Intelligent Systems (INS) has established itself as the go-to payments-processing software provider specializing in complex credit. Previously under the radar, the company is attracting attention after being tapped by Goldman Sachs and Apple to support the new Apple Card.  The announcement was a whale for the company and, if the partnership is successful, could set Intelligent Systems on a path to multiply in size while attracting other large clients seeking highly flexible and customizable software to manage authorizations, fraud identity, interest and rewards calculations, and other merchant processing functions. Intelligent Systems’ CoreCard software was purposely built to uniquely address the rapidly evolving merchant processing market with solutions that other large software providers are not built to handle.  They have made investments in their software technology that create a barrier to entry for competitors.