1. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 165
Visa Inc. (NYSE:V) is a leading global digital payments company that facilitates electronic transactions across more than 200 countries. It operates primarily through Visa-branded credit, debit, and prepaid cards, providing essential infrastructure for financial institutions and merchants without directly issuing cards or extending credit. Visa Inc. (NYSE:V) is one of the best digital money stocks to buy.
On September 26, 2024, the company announced its plan to acquire Featurespace, a firm specializing in real-time AI technology for fraud prevention. This acquisition aims to enhance Visa Inc.’s (NYSE:V) capabilities in combating payment fraud and is expected to close in fiscal 2025, pending regulatory approvals. Such strategic moves underline Visa Inc.’s (NYSE:V) commitment to innovation and security in the rapidly evolving digital payments landscape.
Financially, the company has shown robust performance. In the fourth quarter of fiscal 2024, Visa Inc. (NYSE:V) reported net revenues of $9.6 billion, marking a 12% increase year-over-year. Additionally, GAAP net income rose by 14% to $5.3 billion. This strong performance was driven by increased payment volumes and transactions. Visa Inc. (NYSE:V) also returned significant value to shareholders, repurchasing approximately 62 million shares in its fiscal year 2024 for $16.7 billion, indicating confidence in its financial health.
Additionally, the company has a strong focus on innovation as it aims to expand its capabilities to non-card payments. During its fiscal fourth quarter of 2024, Visa Inc. (NYSE:V) introduced the Visa A2A service, which aims to simplify account-to-account payments, targeting bill payments in the UK with a launch planned for 2025. This initiative reflects Visa Inc.’s (NYSE:V) strategy to diversify its offerings beyond traditional card payments and tap into new revenue streams.
With a strong brand presence and ongoing innovations in payment technology, Visa Inc. (NYSE:V) is well-positioned for future growth. As of the third quarter of 2024, Visa Inc. (NYSE:V) was held by 165 hedge funds, according to Insider Monkey’s database. Mar Vista Investment Partners, LLC stated the following regarding Visa Inc. (NYSE:V) in its “Mar Vista Focus strategy” third quarter 2024 investor letter:
“After lagging the broader markets over the last one, three, and five years, we believe Visa Inc.’s (NYSE:V) stock now reflects a more conservative and realistic expectation for future cash flow growth. The electronic transaction toll-taker has long enjoyed a highly defensible network effect that connects global buyers and sellers and scale advantages that keep upstart competitors from disrupting the industry’s economics. At the same time, Visa directly benefits from the secular trend of replacing cash with e-payments. Penetration rates and transaction volumes in developed markets will inevitably slow over the next five years yet we expect Visa revenues to grow 8-10% over our investment horizon. Key value drivers remain global consumer spending growth, e-transaction penetration, “new flows” expansion in areas like business-to-business transactions, and lastly, value-added client service growth.
Visa’s dominant position is reflected in its nearly pristine financials: 68% operating margins, greater than 70% incremental operating margins and only 3-4% capital expenditures as a percent of sales. Awash in excess capital, Visa is one of the more aggressive purchasers of its own stock. Shares outstanding over the last fifteen years have declined by one-third and we expect the company to continue to repurchase 2-3% of shares outstanding annually. Since the 2016 acquisition of Visa Europe, total returns on capital have expanded from 25% to 50% and we expect the metric to approach 100% over the next five years as net operating profits expand roughly 60% on a flat capital base. Overall, Visa should compound per share intrinsic value at 10-13% over the next five years.”
Overall, V ranks first among the 10 best digital currency and payments stocks to invest in. While we acknowledge the potential of chemical companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than V but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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