Top picks 2012: Visa

The world's biggest payment network benefits mightily from the rise of a global cashless economy.

By TheStockAdvisors Jan 13, 2012 6:32PM
Image: Creditcard Computer (© Stockbyte/SuperStock)This post is one in a series in which more than 50 newsletter advisers share their Top Picks for 2012.

By Nicholas Vardy, Alpha Investor

A business with steady and rich cash-flow that benefits from an  expanding global sector, Visa (V) is one of my favorite long-term ideas.

As the world's largest credit-card network, present in more than 200 countries and territories, Visa is well positioned to profit from the emergence of a global cashless society.

Today, credit cards are used for over $2.5 trillion in transactions each year. That figure is growing inexorably as the new members of the global middle class turn to credit and debit cards.

Visa's extensive networks give it a very powerful competitive advantage, creating a wide moat that keeps potential competitors from even trying to enter into the global-payments technology space.

Visa's major challenge in the U.S. is the newly regulated debit card market. But like any good business, Visa is passing on the resulting costs to you and me.

Although the U.S. remains Visa's top source of revenue, management's goal is to drive 50% of revenue from international markets by 2015.

After all, that's where the money is. Visa's international businesses grew 19% in the fourth quarter, driving 65% of overall revenue growth.

Visa is also aggressively stepping up investment in new technologies that will increase transactions on its core business platforms and create new revenue opportunities.

Today, 46% of all e-commerce transactions are conducted with a Visa product. Visa has a premium brand, a nearly impossible-to-replicate network and double-digit earnings growth.

The company maintains a solid balance sheet as a result of its IPO in 2008, holding $7.4 billion in cash and almost zero debt.

And Visa's revenue has been growing at a compounded annual rate of 13.6%, despite some very tough economic times in the past three years.

Using a discounted cash-flow methodology, most analysts put a value of about $125 on the stock, a solid 24% premium to where it closed Friday. With an attractive valuation and a wide moat protecting its business, Visa looks like a long-term winner.

See all 50+ picks in our Top Picks Report 2012.

Steven Halpern's​​​ offers a free daily review of the favorite stock ideas of the nation's top financial newsletter advisors.

Tags: V


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
262 rated 2
480 rated 3
651 rated 4
649 rated 5
629 rated 6
616 rated 7
496 rated 8
346 rated 9
111 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.