Visa Inc. (V)

Everybody is using credit cards and shopping is going mobile. You can’t pay for your online shopping with cash. Stock has popped recently because there is an opportunity for it to acquire VisaEurope. Beautiful balance sheet. Valuation is expensive, but they just compound capital. There is still more runway to grow its business. Dividend yield of 0.7%.

A very fast growing company and a very simple business model. They process transactions and the sponsoring bank takes on any credit risks. Transactions are increasing at a very rapid rate. About 55% of their business is now done internationally, and about 60% of their business is debit cards. With the correction, they are down to about 20X earnings, and it is an excellent time to make an investment in this company.

He doesn't hold Visa, but has MasterCard on their focus list. Visa is a great company. They have a business model that makes sense. It is a solid volume business model. They have a strong management. They are good with the buy back and the dividend. This will continue to be a strong secular grower. He likes both MasterCard and Visa.

North America has been the lead in the declining use of cash and well ahead of other geographies, especially China and emerging markets. We are still in the early days, and there is still a significant transformation to take place. This company stands to benefit. The chart is basically straight up and on a valuation basis you have to scratch your head and ask how much of that is priced in. He feels there is still a lot of upside, but you have to be willing to accept some volatility. You can buy in and then buy more on weakness, or wait to step in on weakness, but the risk is that you are going to continue to miss upside.

There are high expectations for retail throughout this year due to low commodity pressures, giving a low cost of gasoline. We are approaching a period when retail stocks/consumer discretionary in general tend to do well from October through to December. Technically the stock broke out above resistance which should now act as support.

(Top Pick Aug 19/14, Up 37.23%) In developing markets cash and cheque is 55% of payments. More markets are moving toward more electronic payments. They get paid by transaction volume and by their size, which are both growing.

Likes a company that is protected from competition by a moat. Very few companies that are protected like Visa. He thinks they have unbelievable potential growth especially in Asia. Terrific business even at this price.

Finds this is relatively expensive and you can find better value in the market right now. As a long term holding, it has been a terrific franchise for people. It wouldn’t be his 1^st choice.

Visa (V-N) or MasterCard (MA-N)? He feels this one is the bigger and the better of the 2. MasterCard has a bit more of a technological change going for it, but this one is the bigger size. Both are priced to perfection, and he questions if that growth is going to be able to get there. There are a lot of potential disruption coming with PayPal and Apple Pay. If there were to be a pullback, both companies would pull back quite substantially because their multiples are so high.

A transaction company and transactions are growing internationally at 10%+, domestically and in Canada in the high single digits. They are able to grow their earnings at the 18%-20% annual rate. Not an inexpensive stock, but certainly the growth supports the valuation. Have a couple of things coming up that are exciting. They have the Olympics in Brazil as well as FIFA in Brazil. Both of those are sponsored by this company, and there is always a very big uptick in terms of transaction growth when advertise through these mediums. Dividend yield of 0.67%.

(A Top Pick July 8/14. Up 31.03%.) Still likes this. Had bought this because of the secular shift on electronic payments. They have a very low cost infrastructure base, which is going to be important as electronic payments in general get more competitive. In emerging markets cash and cheques still account for over 60% of transactions, whereas in developed markets it is closer to 30%-35%, so there will be a lot of growth in emerging markets.

Stock has been on fire for the last 4-5 years, and thinks we are still in the early stages. It still has lots of upside, primarily because of the move away from spending cash and going to plastic. As much as it has happened in North America, globally it is still quite young and there is going to be much more of a move in that direction in the coming years. Also, are in bed with Apple Pay, which is in the very early stages. Trading at around 30X PE. Prefers this over MasterCard (MA-N). You have to be willing to accept some volatility and that you are not going to get paid much of a dividend.

Visa (V-N) or CitiGroup (C-N)? From his perspective, he would say Citigroup because it is probably a better investment at this point in time because a) it is much cheaper from a multiple perspective and b) this one has a much higher multiple. This has been a phenomenal stock.

(Top Pick Jul 14/14, Up 23.34%) It has to do with China where there is a huge upside. There is a worldwide under penetration of credit cards. They are the biggest and at the time he bought it the price was the best. He still thinks so.

He has been a long term bull on V-N and MA-N. Like the Dow, it has been struggling all year. The risk for the next couple of months is to the downside. You want to be a buyer in the low $60s on market pullbacks.