Visa Inc. (V)

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.

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.