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For us one of the stocks that stands out from a global perspective is Visa, the world’s biggest payment processing network.
It is one of the core investments in our Global Franchise Fund.
The most important reason why this company excites us, is because it offers a unique way to gain exposure to the financial services sector without the high risk of a banking share.
In terms of our investment philosophy, we seek out companies with exceptional qualities that are able to secure their own prosperity and future to a large extent, regardless of market movements.
We are particularly interested in enterprises with sustainable business models in which they continue to invest.
Visa is such a company.
It came into being in the 1950s when a bank created payment platforms, but listed only relatively recently in 2008 and has since put up a very good show (with a total yield of 260% from its listing until now, compared to the 39% of the MSCI AC World over the same period).
Today Visa is the leader in its field, with more than 2.1bn cards worldwide.
It processes a volume of about $6.3tr per year out of the some 80tr transactions happening on its platform, and earns a fee for each transaction going through its network.
With more technology being added over the last number of years with the entry of competitors such as PayPal and developments in the field of smartphones and apps, the feasibility of Visa’s model has become a matter of concern.
Our view, however, is that these developments contribute to the case for an investment ?in Visa.
Visa’s competitive advantage lies in the simple manner in which it links with an individual’s bank account, and the required authorisation and clearance that it can provide.
Banks are reluctant to allow other parties access to their architecture and accounts, for security and financial reasons.
This article originally appeared in the 29 October 2015 edition of finweek. Buy and download the magazine here.
