Thesis intact, stock reacts positively

Visa takes you places. It seems that it has taken you further as an investor in its not so long period as an investment, the company has only been listed since March 2008, March 18 to be precise, be sure to put that into your calendar as the day BEFORE my birthday, OK? Accepting all presents now, we are open. Just a refresher in terms of ownership structure, the Western European operation is a separate business under the same brand, principally owned by the member banks in that region. Since it listed back then, the company has returned an astonishing 285 percent to their shareholders, that is nothing short of remarkable.

Let us hammer straight into these numbers -> Visa Inc. Reports Fiscal First Quarter 2015 Net Income of $1.6 billion or $2.53 per Diluted Share and Announces a Four-for-One Stock Split. That just about says it all, the headline that is. Payments processed increased 10 percent to 17.6 billion inside of the three months, the company is capable of processing a lot more than that, around 56 000 transactions a second. That is a whole lot of swipes. They have that processing power for a reason. I can think that many governments and societies would want to be cash free, take the awful events at the Bedford centre yesterday for instance, no cash = no cash in transit heists. It would eliminate crime activities if there was a trail, it is a "no brainer".


As you also saw from the link to the investor relations page, the company will do a 4 for 1 split, meaning that the share price will adjust accordingly too. In other words, on the 19th of March (its my birthday!) you will see four times the number of shares, equally you would see the share price trading at 60 odd Dollars, factoring in an after hours bounce of 4.64 percent (at 259.5 Dollars) it is likely to be closer to 65 Dollars. The dividend, which was declared yesterday at 48 cents a quarter, will adjust to 12 cents a quarter, the earnings per share will simply be divided by four times more shares in issue. It is simple. Why do companies do share splits? As a member of the Dow Jones, which is a price weighted index (i.e. the bigger the share price, the more the influence over the index), it makes sense when your share price gets "too high" that you adjust. Equally for retail investors it makes sense. It is basically for more liquidity, although with average volume, around 2.37 million shares swapped hands daily, that does not seem like too much of a problem.

Share buybacks, why do companies do that? There is still an amount of 4.2 billion Dollars outstanding, the company bought back in the region of 5.6 million shares so far in the first four months of the fiscal year. Or around one percent of stock. If you are a committed holder of the shares of the business, this has a positive impact, provided that the company does not issue too many shares to their staff. Although, as a holder of the business, you want the staff to be incentivised. It is a tricky balancing act. In the transcript call (you have to sign up, it is free, I often point to these, it is worth it: Earnings Call Transcript) the company talks about the currency headwinds and in fact lower gas prices in the US shaved a little off. Lower gas prices = less money spent to fill up the same tank.


The company has monster margins, remembering that their job is to process the payment, they are neither a bank or financial institution, they are a technology business that benefits from increased consumer payments. They have the payment networks and whilst Bitcoin and some other "unique" payment methods may be adopted by out there consumers, the internet shopping and ecommerce shift is a huge opportunity for them. Apple pay for instance is where you store your credit card details. This is a great business, which trades at a premium to the market, for a reason. There are still many more growth prospects across all territories on the planet, if you are positive on the prospects for all economies, look no further than Visa as a firm buy.