The recent sell-off driven by the coronavirus from China hasn’t left many stocks spared. That includes Visa (NYSE:V) stock. Although shares recently rebounded from their 52-week lows, they remain far below record highs set last month.
Yet, the secret to success with Visa shares isn’t short-term price action. What happens this quarter, or this year, is just noise relative to the long-term upside potential in this global payments leader.
Along with being a cash cow with a large economic moat, Visa offers massive growth runway. If you understand my investing philosophy, you know about the importance I place on “mega trends.” These are game-changing developments that determine who prospers and who stumbles. Luckily for us, Visa is on the winning side of the equation.
Why? Three simple words: future of payments. Just like another favorite of mine, PayPal (NASDAQ:PYPL), V stock is a play on this mega trend. With one foot in the “old school” payments infrastructure, and another foot leaping forward towards the future, this stock offers a unique setup for long-term investors.
With this in mind, it’s no question Visa shares should be a core holding in most portfolios. Diving into the details, the stock’s opportunity at the current price is even more apparent.
V Stock Benefits from Megatrends in Motion
It’s beyond question that Visa benefits from a tremendous economic moat. The traditional payment processing business is an oligopoly. In other words, with the company competing with only Mastercard (NYSE:MA) and a few others, the business remains a high-margin cash cow.
But, unlike some other oligopolies, the payments business has significant runway. Why? As I’ve discussed before, “GDP-plus.” In other words, Visa “double-dips” into two growth trends. Firstly, the increase in global GDP. This makes Visa a de-facto play on the developing world’s rising share of economic output. Think China, India, and the other emerging economic superpowers.
Secondly, Visa benefits from the move to a cashless society. As credit and debit cards replace cash, the company benefits from transaction growth. From “GDP-Plus” alone, the company has exposure to two key mega trends.
Yet, this isn’t the only play with V stock. You may be concerned that this “old school” company faces competitive pressures from the likes of PayPal and Square (NYSE:SQ). But, thanks to their recent acquisition of fintech giant Plaid, the company is well-protected.
That is to say, with ownership of Plaid, the company is on the winning side of the “future of payments” mega trend.
Plaid Deal Ensures Visa Survives (and Thrives)
Acquiring Plaid is a game-changer for Visa. Plaid’s technology enables users to connect traditional financial accounts to new app-based platforms. For example, Plaid’s technology is what allows you to link your bank account to your Venmo account.
Plaid is the “back-end” for fintech. And by adding this technology to their portfolio, the door’s open for Visa to enter new lines of business. But, the deal also protects the company’s downside if and when new payment platforms supplant the old school infrastructure.
In short, Plaid ensures Visa survives and thrives as the future of payments mega trend accelerates. What happens if the Plaid deal doesn’t pay off? What if another fintech disruptor threatens the company’s economic moat?
That’s the beauty of investing in V stock. The company’s strong cash flow generation gives it the resources to acquire and/or organically develop new innovations in payment technology. Both well-capitalized and forward thinking, this a cash cow with a growth-oriented mindset.
With this in mind, current headwinds from the coronavirus outbreak appear to be a mere hiccup. Granted, short-term results could take a hit. But today’s crisis could also be an opportunity.
‘Slow and Steady’ V Stock a Screaming Buy at Today’s Prices
With shares trading around $160 per share, Visa is a screaming buy. Short-term investors may be thinking, “when will this stock return to its high-water mark?” But the real opportunity isn’t in how fast shares can rally back above $200 per share.
Investing is a marathon, not a sprint. Slow and steady is key to long-term success. Market volatility can throw you off course. But Visa stock offers both consistency, and a clear pathway to long-term growth. Firstly, via its exposure to global GDP growth and the move to cashless transactions. Secondly, through its shrewd acquisition of Plaid, and its own efforts to get on board with the future of payments.
Bottom line: make V stock a core position in your portfolio. Buy now while shares remain cheap at 26x estimated forward earnings. With exposure to many mega trends, shares are set for long-term appreciation.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.