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Monday, September 28, 2009

October stock pick for 2009 is Visa ( V ) ??

Visa ( V ) price as of 9/27 - 71.14 Target price 89.50 by 2/10.

Visa Inc. operates a retail electronic payments network. The Company facilitates global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses and government entities. Its primary customers are financial institutions, for which it provides product platforms encompassing consumer credit, debit, prepaid and commercial payments. VisaNet, its centralized, global processing platform, enables the Company to provide financial institutions and merchants with a range of product platforms, transaction processing and related value-added services. The Company owns a family of payment brands, including Visa, Visa Electron, PLUS and Interlink, which it licenses to its customers for use in their payment programs. It manages and promotes its brands through advertising, promotional and sponsorship initiatives, and by card usage and merchant acceptance.Recovering economy will be a huge boom because everyone pays with plastic- even when not buying on credit (debit cards). World-wide recognition, and politicians are too busy fiddling with health care to worry about reforming the credit card industry. Buy and hold until health care is decided, and then start watching for Washington to pay attention to credit cards.The leader in the future for business and consumer transactions.Long term trend - cashless society. I haven't had a Mastercard in a long time and have never bothered to sign up for American Express. Discover seems lame. Visa is the clear leader in a space with few players. Additionally, defaults mean squat to them. They simply provide the infrastructure. They get paid by the swipe! As an idustry I think the credit card market with the rest of the credit industry is in for a world of hurt with increasing defaults.The only one I would invest in if I had to is Visa. Reason, well they're debit card side of the buisness has surpassed its credit card buisness. As credit cards become harder and harder to come by due to tighter restrictions, bad credit record, etc.. people will fall back on they're debit cards. The other piece of plastic. Now coupled with positive earnings the past two quarters and expected surge in debit card use, its going up. Now Visa might take a hit but in the long run this company will outperform.Profits come from both directions of the consumer credit/debt models. Whats not to like about that? Everyone knows this. World economies will embrace credit card companies more and more which is a sustainable growth rate for years. I expect Visa and MC to both do well on that assumption hopefully lowering the P/E ratio to a more acceptable level; probably the only con I see at a glance. Everyone moving to an all cash transaction economy you say?As has been mentioned Visa doesn't carry the debt. I think usuage will continue to rise for now as even people paying off their cards are using them to stretch their money. Visa makes money on the usage, not the debt.
The potential bump in the road is what the government may do with credit cards, that is the only reason this is a shor pick for me. But I still think of it as a long term winner. Whats in your wallet?
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