My Visa Long is Getting Long in the Tooth


Over my lifetime I have invested in many different things. In the process of doing that, I have learned that there are really only two types of investors. As an investor, you are either active or passive. Being active implies directly managing or being in control of your investment. In contrast, as a passive investor you allow others to manage the asset on your behalf. There are advantages and disadvantages to both approaches, and neither approach is necessarily better than the other. It all comes down to each individual’s personal preference.

When I was younger, one of my active investments was running a quarter horse ranch. Unlike humans, a horse’s teeth continue to grow as they age. Consequently, you can judge the age of a horse by looking into its mouth and checking the length of his teeth. The longer the horse’s teeth, the older the horse. This method of checking the horse’s teeth to determine its age is also the source of another old adage “never look a gift horse in the mouth.”

As a long-term investor in Visa (V), I would describe my experience more recently as a gift. Therefore, I do believe it’s time to question the value of this gift. More precisely, I believe it’s time to question the valuation of Visa.

FAST Graphs Analyze Out Loud Valuation Analysis of Visa

I have been long Visa since May of 2011 and it has been one of the best performing stocks I have ever owned. However, the following analyze out loud video clearly illustrates the undeniable reality that Visa’s stock price has become significantly overvalued. I believe the risk associated with such a high valuation is crystal clear when viewed visually via FAST Graphs. Visa continues to be a great company with a clearly defined future. But investors should never forget that price is what you pay and value is what you get.

Summary: Visa Inc.

Although I am currently challenging whether it’s prudent to continue holding on to my position in Visa or not, it’s important to point out that my view of the company remains extremely positive. In other words, I still like the company today as much or even more than I did when I purchased it in May 2011. The company has performed almost precisely as I expected it to. Furthermore, I expect the company to continue growing at above-average rates of 15% to 20% per annum going forward.

There is a lot more to Visa than simple credit cards. The following long business description courtesy of S&P Capital IQ summarizes Visa’s businesses and its long-term opportunities.

“Visa Inc. operates as a payments technology company that connects consumers, merchants, financial institutions, businesses, strategic partners and government entities worldwide.

The company’s transaction processing network facilitates authorization, clearing and settlement of payment transactions and enables it to provide its financial institution and merchant clients a range of products, platforms and value-added services.