We recently published a list of the 12 Best Stocks to Buy in 2025 for Beginners. In this article, we are going to take a look at where Visa Inc. (NYSE:V) stands against other best beginner stocks to buy in 2025.
Stock Market Outlook for 2025
On December 12, Tom Lee, Fundstrat Global Advisors managing partner and head of research, appeared on CNBC to talk about his 2025 playbook. After two years of significant market gains, Lee’s playbook painted an optimistic yet cautious outlook for the stock market in 2025. He anticipated that the S&P 500 would rise to approximately 7,000 by mid-2025 before retreating to around 6,600 by the end of the year. This highlights an overall expected increase of about 8% for the year, consistent with historical averages for stock market returns.
Furthermore, Lee estimated the Earnings Per Share (EPS) for the S&P 500 to be around $260 in 2025, going up to $300 in 2026. These numbers are slightly below the Wall Street consensus estimates, which show an average of around $268 for 2025. Talking about his investment thesis, Lee believed several themes could bring a positive trajectory in the market in 2025. In his own Dickensian version, he predicted a “tale of two halves,” where the first half of 2025 is expected to see strong market performance, with a potential pullback in the second half. The positive first-half performance is attributed to factors such as market-friendly initiatives under President Trump’s administration and Federal Reserve policies. The pullback in the second half of 2025 reflects historical trends after strong consecutive years.
READ ALSO: 12 Undervalued Defensive Stocks for 2025 and 10 Best Soaps and Cleaning Materials Stocks to Invest In.
Mega Cap Companies: Is There Potential?
Lee was of the opinion that the small-cap sector may have potential even though it has historically underperformed relative to large-cap stocks. He also talked about mega-cap companies and how they’re leading, mentioning that investors typically reach for these companies when there is even a possibility of risk in the market. In addition, mega-cap stocks are highly sensitive to falling interest rates. Since the tech market is bullish after the December rate cut is in effect, the investment case for megacaps is further strengthening.
However, despite an overall positive outlook, Lee acknowledged that several risks may impact market performance. For instance, he was of the view that the newly formed Department of Government Efficiency (DOGE) could potentially lead to reduced government spending and slower economic growth if it is too effective in cutting costs. Furthermore, the implementation of tariffs poses another concern, as tariffs can adversely affect corporate profits and financial conditions. Lee’s pointing out of historical patterns showed that after two years of considerable gains, markets are prone to decline in the latter half of the third year.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 40 blue chip companies with a 10-year revenue compound annual growth rate (CAGR) between 7%-15%. We then selected the top 12 stocks most popular among elite hedge funds. We sourced hedge fund data from Insider Monkey’s database. The stocks are sorted in ascending order of the number of hedge fund holders that have stakes in them, as of Q3 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a modern payments terminal with a pile of credit cards on the side.
Visa Inc. (NYSE:V)
10-year Revenue CAGR: 10.96%
Number of Hedge Fund Holders: 165
Visa Inc. (NYSE:V) provides digital payment services. It offers credit cards, debit cards, prepaid products, global automated teller machines, and commercial payment solutions. The company’s stock has surged around 380% in the past decade. In addition, its revenue grew at a compound annual growth rate (CAGR) of 11% between fiscal 2024 and fiscal 2024. Visa Inc. (NYSE:V) has a solid market presence due to its consistent growth, resilience during economic turbulence and geopolitical conflicts, and wide moat.
Analysts are thus bullish on the stock and expect its revenue to grow at a CAGR of 10% between fiscal 2024 and fiscal 2027. Its EPS is anticipated to surge by 13% in the same time frame. The company is also expected to benefit from the secular trend of preferring e-payments over cash.
According to Allied Market Research, the global credit card payment market is expected to grow at a CAGR of 8.8%. Therefore, analysts expect Visa Inc. (NYSE:V) to continue its growth trajectory and expand its market share in the coming years, as it has already bought back around a fifth of its shares over the last ten years. It ranks second on our list of the best stocks for beginners in 2025.
Mar Vista Global Strategy stated the following regarding Visa Inc. (NYSE:V) in its Q3 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 2nd on our list of the 12 best stocks to buy in 2025 for beginners. While we acknowledge the potential of V, 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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Disclosure: None. This article is originally published at Insider Monkey.