Visa Inc. (V)

(Market Call Minute.) He likes payment systems and likes both Visa and MasterCard (MA-N), and the companies behind the technology also.

This is a momentum stock. Valuations are 25X forward earnings. They bought back a part of their business in Europe, so they are expanding. He has no problems with this one because free cash flow growth is there, the business model is there and they are taking market share away from MasterCard (MC-N). If he were buying it today, he would probably take a half a position.

The largest retail electronic payment network and payments brand. As the global economic conditions continue to recover near term, they’ll grow from improving consumer trends as well as transaction volumes. Recently acquired Visa Europe, which will be good for cost savings and earnings. In developing nations, cash and cheques are still two thirds of payments. Long-term growth rate is 16%. Dividend yield of 0.75%.

Global electronic payment player, the largest in the world. This is a play on the transformation of cash and cheque to electronic payments. Within the developed markets, cash and cheques represent about 30%-35% of payments, whereas in emerging markets it is above 57%. A lot of upside in emerging markets to make that transformation. In developed markets this is a play on increased personal consumption. Recently announced that they are buying Visa Europe, which was owned by all the banks in Europe. There will be opportunities to improve margins through cost reductions. Dividend yield of 0.75%.

He tends to look at 10-20 years of data and this has only been trading for about 6 years, so it is hard to gauge. Using American Express which has been trading for a long time, it tends to drive up higher during the periods of seasonal strength for the retail industry, from about Sept-Nov and Jan-April. Technically Visa is showing a head and shoulders pattern which has been broken and looking at a downside to $71. Look for a basing pattern in January before getting excited.

MasterCard (MA-N) has a little more international exposure, but is probably a tighter run ship. Both are broadly benefiting from the same trends. They are both great names. (See Top Picks.)

Stock vs. Stock. FB-Q vs. V-N. FB-O has not been around for 20 years so you can’t do a seasonality chart. The stock is hanging in there while the market was actually going down. If it goes above 109 it will push it into all time highs. V-N is considered a technology stock as well and does well until the middle of February. Chances are good it will break to new highs. Buy now for a seasonal trade.

A phenomenal company. Really one of the top picks in the financial space. Very strong growth. Just signed a deal with Costco and ARP. They are looking to get into China by 2017. Just acquired Visa Europe. Margins are roughly 60% plus. Growing the top line at about 10%-12% a year. Bottom line is growing 9%-10% a year. A very strong name with an identifiable catalyst.

They have recently agreed to purchase Visa-Europe. It is an add-on of a company that has great opportunity. Europeans don’t use credit cards as much as North Americans. Google Pay and Apple Wallet want to attach themselves to companies like Visa.

It is an upward trend. It is outperforming the S&P 500 and above its 20 day moving average. Technically the stock is okay. Seasonally it will do well around the beginning of December until April. Now is a good time to own this one.

A great entry point. Their transactions are growing 10%+ internationally and about 8%-9% domestically. Very well managed. International growth is going to increase as they have just announced a deal with Visa Europe. The non-North American market is not as well developed, so there is more opportunity to make inroads. Also, Olympics are coming up, which will be good for business.

Visa (V-N) or MasterCard (MA-N)? She likes this whole space and likes both companies, but only owns this one. There is a secular transition to electronic payments. There is a lot of growth going forward, especially in emerging markets. This is going to be buying out Visa Europe, which will be a catalyst to get their earnings growth up for the next couple of years. Her preference right now would be this company, but you could put money in both names with a little bit more into here.

A wonderful business. They grow the business at high returns with very little tangible assets. The thematic play still makes sense. There are still people around the world that are using cash. Everybody is doing shopping online, and you have to use Visa. The Visa network continues to grow. Likes their acquisition of Visa Europe which has 20% margins compared to this company’s 60% margins, so expect that 20% to increase over time. This is not cheap, and it will never be cheap.

They are growing, but the growth rate is slowing. The revenue side is starting to slow. The market at some point will take their multiple down. You should start to see a lot more volatility in the stock, especially if they miss on earnings in some quarter. He would want to take some money off the table at a high and then put it back in when it pulls back. But it is a great company.

A great story. Just acquired Visa Europe, and the stock pulled back on that. It was a great acquisition for them. This company is a toll booth. On every transaction they get a percentage. There is no credit risk. The world is moving away from cash and into plastic or some kind of smart phone device. It has never been a cheap stock. If you can get this on a little pullback, he would do it, but you are not going to get it very cheap.