Visa Inc. (V)

It surged and continues to. Has done a terrific job. 60% operating margins. A new CEO from 2012. He likes the business very much. 80% of global retail sales are still done in cash. V-N does not yet own Visa-Europe.

US financial service industry has a period of seasonal strength from around the middle of December right through until the end of April. Credit cards have done very well during the recent Christmas period, so look for them to report some pretty good numbers. Technically this looks very, very good. This is the highest priced stock in the industrial average, and has the biggest impact of any stock in the Dow Jones. Technically it is in an upward trend, and if the Dow is going to go higher in 2015, watch this stock in particular because it will be a leader in what happens to the Dow.

A very simple story. A toll booth. 24 times earnings. They have no credit risk. Apple pay really helps V-N because they effectively use it. There is still some good growth globally for this company, especially in emerging markets.

Shorting and covering? The bigger trend on the stock is not bad. The chart shows that this is definitely overbought. Technically speaking, he does not like shorting stocks in an uptrend. Possibly a cover might be at $228. Watch momentum oscillators for a round over, and then short them and cover at $228. There is a lot of risk in shorting.

There was no domestic acceptance of Visa last year, but in the last couple of weeks they announced they are opening up the payment market. This one should be a big deal for this company, but they will have to go through a penetration processes. You have no exposure to payment defaults. They are just a transaction processing company. It is a very expensive story. Longer term you will be okay. The valuation is very expensive.

Chart shows it had been consolidating for a while and then had a parabolic move in October. This is probably a very overbought stock. If so, you would want to wait and see if it pulled back a bit.

Own the credit card companies rather than retail companies because that is where the money is made. It continues to do really well.

Biggest jump in 3 years today. He has been a big fan of this area. He thinks there will be no cash in the future. We will be a cashless society. The long term is great.

Visa (V-N) and MasterCard (MA-N) are very similar financial profiles, so whether you purchase one versus the other, they are both good names. This is a very strong long-term name to own. Lately some of these credit card companies have not done as well as some of the lesser-known credit card companies. This is a decent name to own long-term. You are going to get 50% growth rate, and it’s trading at 20X PE right now.

The trends going forward make a lot of sense for this company. Less people are going to be using cash going forward. There is inflation protection built-in. As you spend more money and prices rise, they make a higher transaction, because it is all based on volume.

About the only thing that he doesn’t like about this company is the price. This is a long term way to play the global consumer. A very interesting story. This is one that you buy and hold for the long-term.

NFC payment though phones looks somewhat promising. V & MA are both well placed. He is watching it and looking for weakness.

(Top Pick Oct 4/13, Up 12.90%) MasterCard is more expensive than this one. They take on no credit risk. They are a transaction company. While eBay splits off PayPal, Visa is in the sweet spot. Their volumes should increase.

This has run into some of the geopolitical issues in terms of what is happening out there. Trading at 21X forward earnings and expected to have a 15% + long term growth rate. 1.2X PEG ratio, which is not bad for such a household dynamic global name. Very strong cash flow business. There is a secular trend of not using cash, so this company is going to benefit. There are also growth prospects in the developing markets. He prefers Mastercard (MA-N) because it is a little bit more international.

There are challenges to the credit card space as to fees with merchants fighting back. We may have seen the best part of the curve. There is a lot of growth priced into the stock.