Visa Inc. (V)

Likes the scale of this over MasterCard (MC-N). They have now bought in Visa Europe, which is a big opportunity for them. The margins in Europe, for both companies are lower. Visa Europe has not been run as efficiently as MasterCard or Visa, so there is a big opportunity for them to push margins up. 85% of all transaction purchases today are still done by cash. Dividend yield of 0.76%.

Transaction driven and doesn’t take any risks. More international than MasterCard (MA-N). There are a couple of catalysts. (1.) Have made a deal to purchase Visa Europe, which is a big opportunity because the international market is much less penetrated than the North American market. The average European spends about $.37 of the dollar in cash, while in North America it is $.25. (2.) The Olympics are this year, and Visa always does well around the Olympics.

It has been a real performer. It is the play for participating in the move to plastic from cash. North America was the early adopter and it is priced in. V-N will never be cheap. It is always over 20 times PE and now at 25. It had a pullback of about 8% since January. This is a true growth story, but not a value story. It does not have much of a buffer if you are wrong.

It has been a strong performer in the past, but not recently. The market is not liking something about V-N. The warning bell would go off around $66.

There is very strong growth in consumer transactions, especially online transactions. Financial technology companies such as Visa and MasterCard (MA-N) are part of that key theme. If you look at the market over the past 4 weeks, a lot of money has been funnelled into things that are maybe a little more economically sensitive. He would not ignore the financial technology theme. It is going to be hard to hold this group back. (See Top Picks.)

This is a consumer stock, so is very driven by people buying stuff. The chart is pretty choppy even though it has been in an uptrend. Its recent movement has been pretty aggressive. The bigger picture is that we are seeing higher highs and higher lows, so it is not a bad long-term picture. The problem is, it is so correlated to the market and could go down to the summer lows easily if there was a strong correction on the stock market.

This is overpriced relative to his model price of $58.93. One that he would certainly buy if it got closer to his model price.

Thinks Visa Europe will give this company a really good opportunity. The credit card business in Europe is less mature than in North America. The average European spends $0.37 of his dollar in cash, and the average North American is about $0.25. Debit is also a big part of Visa’s business, about 60%, and profitable.

Typical of most of the US financial service stocks, they tend to do very well from around February right through until May of each year. Technically the chart shows this is in a longer-term upward trend. If it breaks above the 2015 high, which was an all-time high, that would be very, very bullish. The scenario is positive for another good move to the upside.

It is like buying real estate in the most expensive neighbourhood. V-N has always been in that high multiple. You have to be willing to buy at high valuation. They are paying you a slim dividend. (0.8%). But he sees this as a growth name. The opportunity is the growth globally if you look at emerging markets. He would buy in thirds over time.

Just reported and beat the analysts’ consensus. This is going to be a brand-new company in a few months, because they acquired Visa Europe. You should buy this, because most of the world, outside of North America, still uses cash for transactions. Generating double digit earnings growth year after year, and still have a long, long runway of growth.

About to report earnings. Their long term prospects look great. He has held it for 6 or 7 years, switching between MA-N and V-N. The multiple of V-N is creeping up and so he would look to put new money into MA-N. This is his favourite area in financials. All the credit cards care about is the activity, not the credit risk.

MasterCard (MA-N) or Visa (V-N)? This is a bit of a bigger company, and the question is really going to come down as to how they manage their currency globally. He understands that this one is a better play if the US$ continues to rise, and MasterCard is better if it starts to decline. That is splitting hairs, but if he had to decide between the 2, he would probably go with this because of its dominance in size.

(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.