In this article, we will take a look at Kevin O’Leary’s stock portfolio and see 15 of his stock picks for 2025.
Television personality, financier, and entrepreneur, Kevin O’Leary, also known as ‘Mr. Wonderful’ is recognized mostly as one of the panelists on the reality shows Shark Tank and Dragon’s Den. In 1986, the Irish-Canadian began his business career by launching the educational software company Softkey with $10,000 from his mother’s investment and leveraging the proceeds from the sale of his SET share.
When it comes to stock investing, Mr. Wonderful seeks names that meet three criteria: They must be quality companies that boast consistently strong financial performance and a solid balance sheet. Second, he believes that a stock portfolio must be diverse across multiple market sectors. Most importantly, however, he demands income, stressing that the companies he invests in should be ones that pay dividends to shareholders. The ALPS O’Shares U.S. Quality Dividend ETF, an ETF offered by O’Shares Investment Advisors, aims to encompass O’Leary’s strategies by holding stocks that combine all three of these characteristics. Since its launch, the ETF has returned 115.18% to shareholders. While high-risk, high-reward investments like those on Shark Tank or volatile assets like Bitcoin can be thrilling, O’Leary believes that a focus on consistent, dependable income should be the basis of a sound portfolio. The venture capitalist summed up this view in a LinkedIn post:
“OUSA is part of the S&P 500, cherry-picking the highest quality balance sheets with positive cash flow from around 100 out of the 500 names. Then there’s OUSM, which grabs the Russell 2000 and weeds out the underperformers – those companies not making any real dough. Forget Shark Tank, forget Bitcoin. Sure, I’ve got a 5% stake in Bitcoin and another 5% in gold, but the meat of my US portfolio? It’s in OUSA or OUSM.”
The Race for TikTok
Former president Joe Biden recently signed a bipartisan bill that deemed TikTok a national security threat and required Bytedance, the platform’s Chinese parent company, to either sell or divest from the platform completely in order for the social media platform to remain available in the United States. During a recent appearance on Fox News’ “America’s Newsroom”, Kevin O’Leary claimed to have made an offer of $20 billion in cash to TikTok’s owners to purchase the platform, saying “Right now, $20 billion is on the table, cash, cash, $20 billion.” However, he added that the federal government wasn’t able to verify whether the data of American account holders was actually being shared with Chinese leaders. That said, he believes the risk wasn’t worth it. Moreover, in light of the dwindling timeframe, he said that companies are weighing the risks of maintaining the app’s availability in the U.S., while keeping in mind the potential penalties for any provider who permits access beyond the cutoff date.
“As of midnight on the 19, any service provider … that could be an Apple, that could be an Oracle, it could be a video compression technology company that’s being paid as a consulting service, any of them that keep this thing alive is subject to $5,000 a day fine times 170 million. That’s over a billion dollars a day.”
Helga Esteb/Shutterstock.com
Our Methodology
O’Leary typically favors equities of well-established, financially stable companies with strong balance sheets and a history of consistent dividend growth. The following holdings are the top 15 from the ALPS O’Shares U.S. Quality Dividend ETF (BATS:OUSA). For these stocks, we have also provided the hedge fund sentiment, as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? 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).
15. Marsh & McLennan Companies Inc. (NYSE:MMC)
Number of Hedge Fund Holders: 54
Marsh & McLennan Companies Inc. (NYSE:MMC) is a multinational leader in people, strategy, and risk management. Its four businesses—Marsh, Guy Carpenter, Mercer, and Oliver Wyman—advise clients in about 130 countries. The company generates about half of its revenue outside of the U.S.
JPMorgan analyst Jimmy Bhular raised the price target for Marsh & McLennan Companies Inc. (NYSE:MMC) from $230 to $235 on January 3. The analyst remains upbeat about market trends in the property and casualty sector as the year progresses, stating that the group will do better on account of its defensive risk profile and steady pricing.
In Q3 2024, the company reported a 12% increase in adjusted operating income and a 5% increase in underlying revenue. It also reported a consolidated revenue of $5.7 billion and an adjusted EPS of $1.63. The $7.75 billion purchase of McGriff Insurances Services was a significant expansion step for Marsh & McLennan Companies Inc. (NYSE:MMC), which is anticipated to generate between $400 million and $500 million in EBITDA.
14. Texas Instruments Incorporated (NASDAQ:TXN)
Number of Hedge Fund Holders: 57
Based in Dallas, Texas, Texas Instruments Incorporated (NASDAQ:TXN) is an American technology company that designs and manufactures semiconductors and other integrated circuits that it sells to electronics designers and producers globally.
In December of last year, Benchmark maintained its $250 price target on TXN and reaffirmed its Buy rating on the stock. The firm expressed its confidence in Texas Instruments’ capacity to handle the fluctuations around demands in the semiconductor industry. This sentiment was supported by a Fireside Chat that Benchmark conducted with the company’s management. The firm also pointed towards Texas Instrument’s strategic emphasis on the automotive and industrial sectors as a major contributor to its resilience. These industries are expected to gain from the increased semiconductor content brought about by electrification advancements, in addition to being sizable and diverse in terms of applications.
Texas Instruments Incorporated (NASDAQ:TXN) reported revenue of over $4.1 billion in the third quarter of 2024, down from $4.5 billion in the same quarter a year ago. With a net income of $1.36 billion, the operating profit came in more than $1.55 billion. Moreover, Texas Instruments Incorporated (NASDAQ:TXN) returned $5.2 billion to shareholders, spent $4.8 billion on capital expenditures, and allocated $3.7 billion to R&D and SG&A expenses over the past year.
13. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 68
One of the largest consumer goods companies in the world, The Procter & Gamble Company (NYSE:PG) serves consumers across the globe with a portfolio of more than 80 iconic brands, including Gillette and Oral-B.
On January 22, The Procter & Gamble Company (NYSE:PG) exceeded quarterly sales and profit projections, as the U.S. market for its toilet paper and dish soaps jumped. Meanwhile, the Chinese market began its rebound following several challenging quarters. The company produced a profit of $1.88 per share, exceeding estimates of $1.86, while its quarterly net sales increased 2.1% to $21.88 billion, compared with analysts’ expectations of $21.54 billion. P&G’s North American sales also grew 4% during the quarter as the company ramped up its investments in new products to entice customers who had left due to price increases over the past two years.
Following these results, Stifel analysts maintained their Hold rating on PG shares with a stable price target of $161. The Procter & Gamble Company (NYSE:PG) has maintained its full-year 2025 guidance in spite of mounting pressures from commodity prices and foreign exchange. In keeping with the consensus estimate of about 3%, the company projects organic sales growth of 3% to 5%. Procter & Gamble also projects a 5% to 7% rise in EPS, with a midpoint of $6.98. All in all, Stifel’s analysis suggests that P&G’s greater-than-expected sales growth could result in a slight outperformance for the company’s shares.
12. Accenture plc (NYSE:ACN)
Number of Hedge Fund Holders: 60
Accenture plc (NYSE:ACN), an information technology company with headquarters in Ireland, specializes in assisting companies with digital transformation by providing services in the areas of strategy, consulting, digital, and technology.
On January 15, Mizuho Securities upheld its Outperform rating on Accenture plc (NYSE:ACN). The endorsement comes after Accenture’s chief AI officer, Lan Guan, met with investors. With about $2 billion in yearly run-rate revenue, or roughly 3% of the total, and about $4.8 billion in yearly run-rate bookings, the conversations emphasized the important role that GenAI has played in propelling the company’s expansion. The discussion also focused on the company’s GenAI as a major growth vertical, highlighting Accenture’s capacity to maintain and duplicate its AI model success.
Accenture plc (NYSE:ACN) reported $17.7 billion in revenue for the first quarter of fiscal 2025, a 9% increase over the same period the previous year. The company has increased its full-year revenue growth forecast to 4% to 7% in local currency as part of its updated business outlook for fiscal 2025. The company now expects a 0.5% negative foreign exchange impact. Its GAAP EPS outlook has also been revised to range from $12.43 to $12.79.
Diamond Hill Capital highlighted ACN in its Q3 2024 investor letter. Here is what the firm has to say:
“We continue finding compelling new ideas, even as the bull market proceeds. In Q3, we initiated three new positions in Aon, Accenture plc (NYSE:ACN) and Builders FirstSource. Accenture is a leading global IT services and consultancy business. We think the services it provides — which are differentiated and in specialty areas relative to many of its peers — are critical and will be in high demand in the technology ecosystem for years to come. This should contribute to stable prices and margins. We believe the market is undervaluing Accenture relative to the opportunity ahead of it and, consequently, were able to initiate a position in the quarter at a discounted share price.”
11. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 60
McDonald’s Corporation (NYSE:MCD) is the world’s largest operator of fast-food restaurants. Since its founding in 1955 as a single drive-in restaurant in San Bernardino, California, it has grown into a global giant, with almost 40,000 locations in more than 100 countries that serve about 60 million consumers yearly.
On January 24, KeyBanc adjusted its outlook for McDonald’s Corporation (NYSE:MCD) shares, keeping its Overweight rating but lowering its price target from $330 to $320. The change comes after a significant drop in the company’s stock price. A shift in investor sentiment away from international fast-food chains and toward domestic full-service restaurants, which might have experienced greater EPS upside as consumer confidence rose, is blamed for the MCD stock’s poor performance.
Conversely, the company has extended its technology partnership with Cognizant after achieving an impressive $25.9 billion in revenue over the last 12 months. Through this partnership, McDonald’s cloud journey will be advanced and enterprise applications are expected to streamline. As of January 25, McDonald’s Corporation (NYSE:MCD), which has increased its dividend payouts for 48 years in a row, is paying out a quarterly dividend of $1.77 per share, with a yield of 2.48%.
10. Comcast Corporation (NASDAQ:CMCSA)
Number of Hedge Fund Holders: 72
Comcast Corporation (NASDAQ:CMCSA) is a media, entertainment, and communications company that operates through three business units: Cable Communications, NBCUniversal, and Sky, Europe’s leading entertainment company. To meet increasing consumer demand, the company is expanding its broadband services and improving its network infrastructure.
On January 2, Loop Capital reduced its price target for CMCSA shares to $53 from $54, while maintaining a Buy rating on the stock. Comcast Corporation (NASDAQ:CMCSA) has faced some challenges recently, including a shift in broadband subscriber growth from annual increases to declines, as well as increased cord-cutting, which has impacted media EBITDA. However, Loop Capital sees potential catalysts in 2025 that could drive price appreciation. These include a lack of negative regulatory events, increased sports and media streaming, and higher broadband usage.
The communications company announced its Q3 2024 results on October 31. Revenue for the quarter rose 6.5% to $31.1 billion. Meanwhile. adjusted EBITDA declined 2.3% to $9.7 billion. However, it was able to boost adjusted EPS by 3.3%, to $1.12. Moreover, revenue for the company’s Content & Experiences segment jumped 19% to $12.6 billion, while adjusted EBITDA fell 8.7% to $1.8 billion.
9. Cisco Systems Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders: 60
Cisco Systems Inc. (NASDAQ:CSCO) is a renowned technology company involved in networking and IT solutions, leveraging AI to optimize network performance, enhance security, and automate IT operations. The company is known for designing and selling networking hardware, software, and telecommunications equipment. In addition, Cisco provides servers, hyperconverged infrastructure, and Software-as-a-Service (SaaS)-based cloud management tools for data centers.
The company reported strong earnings in fiscal Q1 2025, with revenues of $13.8 billion. Although this was a decrease from the previous year, it still surpassed analysts’ expectations by $70.5 million. Moreover, the company reported a net income of $2.7 billion for the quarter and maintained its strong financial position.
According to Citi analysts, Cisco Systems Inc. (NASDAQ:CSCO) is expected to benefit from improved market dynamics for campus-based hardware that connects end-user devices. In a note to clients on January 17, Citi stated that demand for so-called campus switches, which account for roughly a fifth of Cisco’s sales, is expected to resume growth in Q4 2024.
8. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 86
Merck & Co., Inc. (NYSE:MRK) is a leading American multinational pharmaceutical company, historically linked to the original Merck Group established in Germany in 1668. Known internationally as Merck Sharp & Dohme (MSD), the company is known for offering prescription drugs, vaccines, biologic therapies, and animal health products.
The company’s revenue increased by 4.4% to $16.7 billion during the third quarter of 2024, exceeding expectations by $190 million. Adjusted earnings per share came in at $1.57, up from $2.13 the previous year, and in line with expectations. Keytruda remains the company’s primary driver of growth, with revenue increasing by 17% to $7.4 billion during the quarter.
On January 17, Guggenheim adjusted its outlook on Merck & Co., Inc. (NYSE:MRK), reducing the company’s price target from $130 to $122 while maintaining a Buy rating on the stock. The revision is primarily due to several updates to the firm’s financial model for the pharmaceutical giant. Guggenheim’s updates to the model include accounting for the fourth quarter of 2024’s in-process research and development (IPR&D) expenses, stemming from license agreements for LaNova LM-299 and Hansoh HS-10535.
GreensKeeper Asset Management stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its Q3 2024 investor letter:
“Merck & Co., Inc. (NYSE:MRK) was our second-largest detractor this quarter, declining -8.3%. MRK’s leading HPV vaccine, GARDASIL 9, faced challenges internationally due to inventory buildup within its Chinese distributor, which is expected to reduce shipments for the remainder of 2024. Despite this short-term impact, the long-term outlook for GARDASIL 9 remains promising. Meanwhile, the company’s $27 billion Keytruda cancer juggernaut continues to grow at a healthy clip, powering earnings growth.”
7. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 131
Mastercard Incorporated (NYSE:MA) is one of the world’s largest payment processors, thriving in digital and cross-border payments, maintaining strong operating margins, and benefiting from increased travel. The company operates in more than 200 countries and accepts transactions in over 150 currencies.
Mastercard’s revenue increased 13% year-over-year in Q3 2024, owing to strong consumer spending and improved global macroeconomic conditions. In addition, travel-related and overall spending continues to grow, as evidenced by a 10% YoY increase in gross dollar volume and a 17% YoY increase in cross-border volumes. The company’s value-added services revenue increased by 18%, outpacing overall growth, while operating margins increased to 59.3%, resulting in a 16% increase in EPS.
Earlier in December, Goldman Sachs reduced MasterCard’s price target to $557 from $563, maintaining a Buy rating on the stock. According to the firm, the MA stock has increased 18% since the election, alongside other higher beta growth names with pro-cyclical exposure outperforming the market. Goldman believes fintech will benefit from a stronger economy and inflation, as well as many of the potential policy changes under the new administration. However, in the face of higher valuations and limited visibility of fundamental acceleration, it stated that it prefers “to be a bit more selective.”
Qualivian Investment Partners stated the following regarding Mastercard Incorporated (NYSE:MA) in its Q3 2024 investor letter:
“Mastercard Incorporated (NYSE:MA): Q2 2024 revenues and EPS beat consensus expectations, growing 11% (+13% on a constant currency, CC, basis) and 24% (+27% on a CC basis) respectively. Overall payments volume increased 9%, with highly profitable cross-border volumes growing 17%. Management qualified their expectations for a solid FY2024 anchored around continued stable consumer spending, while noting there is uncertainty regarding the overall macroeconomic backdrop heading into the back half of 2024 and 2025. In the event of a weakening consumer, management noted they would adjust investment priorities as well as the company’s cost structure as appropriate if trends softened further. We continue to expect that over the longer term, MA will continue to drive and benefit from the digitization of payments globally.”
6. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 81
Johnson & Johnson (NYSE:JNJ) is a major player in the healthcare industry, with a portfolio that includes pharmaceuticals, Medtech devices, and consumer health products. The company is known for developing drugs to treat a wide range of conditions and diseases, including cancer, diabetes, and HIV/AIDS.
In its recent earnings report, Johnson & Johnson (NYSE:JNJ) announced a sales increase of 5.3% to $22.5 billion, with operational growth of 6.7%. Moreover, JNJ’s full-year sales increased by 4.3% to $88.8 billion, all while the company highlighted significant progress in its R&D pipeline, which includes advances in treatments for diseases like multiple myeloma and lung cancer. J&J’s MedTech division also experienced considerable growth, owing to innovations in cardiovascular and general surgery products. Johnson & Johnson (NYSE:JNJ) has provided guidance for 2025 as well, predicting operational sales growth of 2.5% to 3.5% alongside an adjusted operational EPS increase of 8.7% at the midpoint.
5. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 202
Alphabet Inc. (NASDAQ:GOOGL) is renowned in the technology industry for being a global giant due to its diverse products, including Google Cloud and Google Services, which dominate a number of market segments. Google’s main products—Search, YouTube, Android, Chrome, and advertising services—lead their respective markets, thanks to cutting-edge advances in artificial intelligence.
Alphabet Inc. (NASDAQ:GOOGL) and Taiwan’s HTC recently agreed to invest $250 million to strengthen their position in XR (extended reality) technology. The agreement follows Google’s December release of the Android XR platform, which was created in collaboration with Qualcomm and Samsung Electronics. The purchase aligns with Google’s development of the Android XR platform for smart glasses and headsets.
Stifel analyst Mark Kelley increased his price target for GOOGL stock from $200 to $225 while keeping the shares at a buy rating. Alphabet Inc. (NASDAQ:GOOGL) is still the “dominant leader in search and ad-supported online video,” says Kelley, who also noted that the company has a “long-term growth opportunity” in both AI and digital advertising. Additionally, Stifel appreciates that the company offers a variety of business tools, such as AI-powered advertising solutions, in addition to Google Gemini, the company’s flagship AI assistant.
Qualivian Investment Partners stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q3 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOGL): Q2 2024 revenues and EPS beat expectations, with total revenues growing 14%, Search ad revenues growing 14%, YouTube ads growing 13%, and Google Cloud revenues growing 29%. Revenue growth in the quarter constituted a continued sequential improvement from earlier quarters in the year, suggesting a continued rebound in Alphabet’s core business except for YouTube ad revenues, which missed expectations and showed deceleration in the growth rate as compared to Q1 when it grew 21%. Operating margins improved by 310 bps vs. the same quarter last year.
Management continued to highlight developments with their generative AI program, which is seen as a foundational platform with opportunities across their businesses but particularly in search and cloud. However, this comes with material capex investment well ahead of the expected economic benefits from Gen AI, and the level of spending is leading investors to worry about the ROI on that spend for Alphabet, as well as the other hyperscalers (Microsoft and Amazon). We continue to have confidence in Alphabet’s ability to generate strong revenue, earnings, and cash flow growth well above the S&P 500’s in the years to come and view it as a core holding for the long term.”
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL), a multinational technology company, is well-known for its flagship products, such as the iPhone, Mac, and Apple Watch, as well as its extensive suite of services, including Apple Music and iCloud. With approximately 2.2 billion Apple devices worldwide, the company has a sizable platform from which to launch its AI services.
Bernstein raised its price target for Apple Inc. (NASDAQ:AAPL) from $240 to $260 as part of its 2025 IT hardware industry forecast and maintained an Outperform rating on the company’s stock. The company sees the names in its coverage universe primarily as trading stocks rather than long-term core holdings, and IT hardware as a “structurally challenged sector.” Although many companies’ portfolios are stronger than in the past, Bernstein predicts a more favorable environment for IT spending by 2025. However, it also notes that stock valuations are at the upper end of the spectrum, artificial intelligence profitability remains difficult, and it does not see much upside from a PC refresh cycle in 2025. As 2025 progresses, however, Apple Inc. (NASDAQ:AAPL) continues to be one of the firm’s top picks for the year.
Apple Inc. (NASDAQ:AAPL) reported $94.9 billion in revenue for the fourth quarter of 2024, up 6% from the same period the year before. Product revenue increased to nearly $70 billion from $67 billion in the same period in 2023. In addition, the company distributed $29 billion to shareholders and reported $27 billion in operating cash flow.
In its third quarter 2024 investor letter, Madison Investments said the following regarding Apple Inc. (NASDAQ:AAPL):
“Alphabet Inc., Eli Lilly and Company, Qualcomm Incorporated, Microsoft Corporation, and Apple Inc. (NASDAQ:AAPL) were the largest detractors. Apple has been volatile in the last quarter but ended on strength. Early in the quarter, Apple benefited from the introduction of their AI strategy, Apple Intelligence. They followed in September with the new iPhone 16, which also created some excitement. We are underweight to Apple, which has resulted in a headwind for performance.”
3. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a global technology behemoth best known for its flagship software products, which include the Windows operating system, Microsoft 365 suite, and Edge browser. It provides operating systems, business software, software development tools, video games, gaming hardware, and cloud services.
Following Microsoft president Brad Smith’s blog post on January 6 detailing the company’s vision for advancing artificial intelligence, Citi maintained a Buy rating on MSFT shares with a $497 price target. Although much of the American AI opportunity was high-level, the company’s announcement that it plans to spend approximately $80 billion in capital expenditures for AI data centers in fiscal 2025 was particularly noteworthy. According to Citi, the $80 billion represents nearly all of Microsoft’s fiscal 2025 data center expenditures.
In the first quarter of fiscal 2025, Microsoft Corporation (NASDAQ:MSFT) reported $65.6 billion in revenue, a 16% increase over the same period the previous year. Additionally, the company’s operating income rose to $30.6 billion. Its revenue from server products and cloud services increased by 23%, driven primarily by a 33% increase in Azure and other cloud services.
2. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 82
The Home Depot, Inc. (NYSE:HD) is a leading American company in the home improvement retail sector, offering a diverse range of tools, construction products, appliances, and services, including fuel and transportation rentals.
In the third quarter of 2024, The Home Depot, Inc. (NYSE:HD) reported sales of $40.2 billion, a 6.6% increase year on year. However, comparable sales fell by 1.3% during the quarter. Net earnings were $3.6 billion, or $3.67 per share, compared to $3.8 billion, or $3.81 per share, in the third quarter of 2023. Furthermore, the company has spent $649 million on common stock repurchases, compared to $6.5 billion the previous year.
Although macroeconomic factors have played a significant role in the company’s recent struggles, investors may find its 60% payout ratio appealing. With an operating cash flow of more than $15 billion in the first nine months of 2024, the company’s cash position remains strong. Furthermore, The Home Depot, Inc. (NYSE:HD) maintains its reputation by paying regular dividends, which are currently $2.25 per share quarterly, with a yield of 2.17%.
Carillon Tower Advisers made the following comment about HD in its Q3 2024 investor letter:
“While Home Depot, Inc.’s (NYSE:HD) recent reported earnings were somewhat tepid, the market seems to be pricing in an inversion of the company’s sales, driven by lower interest rates. Home Depot reported its seventh consecutive quarter of same-store sales declines, giving back substantial gains that it enjoyed during the pandemic. High mortgage rates have also put a damper on existing home sales. People typically spend the most on home repairs and improvements in years when they buy or sell houses, often conducting both transactions in the same year.”
1. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 165
Visa Inc. (NYSE:V), a global leader in digital payments, connects 4 billion account holders to over 130 million merchants and 14,500 financial institutions in over 200 markets. Holding 52% of the U.S. credit card market, Visa Inc. (NYSE:V) is the dominant player in the US payments industry and a key facilitator of the global economy.
Back in December 2024, Morgan Stanley analyst James Faucette raised the price target for Visa Inc. (NYSE:V) from $326 to $371 and maintained an Overweight rating on the stock, which is currently its top payments and processing pick through 2025. The firm bases its opinion on Visa’s “attractive valuation,” benefits in travel and value-added services, reduced regulatory scrutiny, and favorable tactical trading dynamics.
The company’s fiscal year 2024 ended with decent financial results, including net revenue of $9.6 billion, up 12% from the previous year, and earnings per share rising 16% to $2.71 in the fourth quarter. By acquiring Prosa and Featurespace in 2025, Visa Inc. (NYSE:V) hopes to strengthen its operational framework and enhance its fraud prevention capabilities.
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.”
While we acknowledge the potential of V, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. 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.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
