Visa Inc. (V)

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.

This would be a good time to enter. This is a provider of an electronic platform for financial institutions, who want to have payment systems related to debit cards, credit cards, prepaid cards, etc. This is a transaction business, so the more transactions, the better. Looking at the growth in emerging markets, it is more of a secular story as market penetration is no where near what it is in developed markets.

Hit hard during the Ukraine/Russia crisis. Now it is in the market that Russia will develop their own network. Visa is a play on the move to a cashless society. 37% of payments are still cash in the developed world. In the developing countries it is 57% so there is a lot more room for non-cash payments to increase. Visa is the largest and has the lowest cost infrastructure and competes most effectively.

A great company and has done very well in the last 3-4 years. If you want to own this, he would take a really small position. If the current litigation goes against them, then you might add more. Growth has been good and this is well-run.

He added it recently as new positions for clients. He likes the story. Hold on long term. The second half of the US recovery will benefit this one.

This company has a tremendous profit margin and a huge moat around its operations. It’s accepted around the world and keeps growing. Throws off cash like crazy. Yield of 0.72%, and there is huge room to grow the dividend.

If you are going to be in this space, this would be the one you want to be in. These companies have such a big infrastructure that it is hard to find a fault. The biggest scare is for merchant fees to come down and/or alternative payment systems. Thinks this infrastructure will continue for a long time. Not cheap. Multiples are way above market multiples, and if they did stumble, this would have a material impact on the stock.

Recent addition. Stock has not participated in the rally. Valuation is more attractive than MasterCard. 57% of payments are cheques in developing countries vs. 37 in developed countries.

Tremendous growth story. This is obviously one that you want to look at as consumer confidence grows globally and consumers take on more debt. Has been a major driver of profitability. Recently had a bit of a hiccup because of what is going on in Russia but doesn’t think this will be a longer-term issue. Trades at a fairly healthy PE multiple of about 24X. You want to give some consideration to a lot of innovation taking place in new payment systems and pipes of payments systems. If new technologies start reducing fees on transactions, that is a longer-term concern of companies like this.

She was hesitant on the valuation and this last quarter there was slower growth, but the valuation is still a bit too rich. She took profits and does not own MasterCard either.

Has some technical support at about $205, which is about where the company is right now. However, looking at its FMV, he can’t give you any further upside. He would go elsewhere, such as Discover Financial (DFS-N), which is trading up much better value.