There aren’t many companies that offer investors the ability for share price appreciation in nearly any growth environment. There are plenty of smart conservative choices like The Coca-Cola Company (NYSE:KO) and The Procter & Gamble Company (NYSE:PG), whose products are sold globally and whose volumes dip very minimally if the global economy turns south. However, the downside to this is they’re generally slow-growth companies, so price appreciation will often be minimal.
On the flipside, if investors go after growth companies like Facebook Inc (NASDAQ:FB), they could take advantage of rapid revenue growth at the expense of a steady dividend, but they run the risk of a train wreck if spending slows.
And then there’s payment processing company Visa Inc (NYSE:V), perhaps one of the very few long-term investments you can get charged up about that combines the potential for rapid growth with consistency in nearly all economic environments. The way I see it, Visa Inc (NYSE:V) has five opportunities that put it at the head of the class.
The comparative advantage
First, what makes Visa Inc (NYSE:V), and its closest competitor Mastercard Inc (NYSE:MA), two genius plays in the payment processing sector is their absolution from doubtful accounts. Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA) are payment processing facilitators. Period! Peers Discover Financial Services (NYSE:DFS) and American Express Company (NYSE:AXP) serve as both payment processors and lenders, giving them the unique ability to double-dip on profits. However, this also exposes these two companies to doubtful collections for those who don’t pay their debts. During the recession, these doubtful accounts crushed the share prices of Discover Financial Services (NYSE:DFS) and American Express Company (NYSE:AXP). As for Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA), no lending ability means they’ll never worry about doubtful account provisions.
Breaking down borders
Second, international markets are a screaming opportunity for Visa. According to Martina Hund-Mejean, the CFO of Mastercard Inc (NYSE:MA), approximately 85% of all transactions are still being done in cash around the globe. This gives Visa ample opportunity to grow for literally the next couple of decades. In its second-quarter report released last week, Visa Inc (NYSE:V) delivered cross-border volume growth of 10% on a constant-dollar basis — and this is just the tip of the iceberg.
A big opportunity in the prepaid market
A move into prepaid debit cards is another area where Visa will look to excel in the coming years. With plenty of consumers’ credit tarnished from the financial crisis, debit cards are the only viable non-cash option.