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Visa Reports Strong Fiscal Fourth Quarter Results

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Image: Visa’s shares look poised to break out to new all-time highs. By Brian Nelson, CFA Visa (V) reported better than expected fiscal fourth quarter results on October 29 with both revenue and non-GAAP earnings per share outpacing the consensus forecast. Net revenue increased 12% on a year-over-year basis, while non-GAAP net income increased 13%. During the fiscal fourth quarter, on a constant currency basis, payments volume increased 8%, while cross-border volume increased 13% and processed transactions advanced 10%. Non-GAAP earnings per share advanced 16% in the quarter, to $2.71, beating the consensus forecast by $0.13. Management was upbeat in the press release: Visa had a robust fourth quarter to finish a very strong fiscal year. I am proud of … Read more

DOJ Antitrust Lawsuits Targeting Our Top Two Ideas: V and GOOG

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   Image: Alphabet’s and Visa’s shares have performed remarkably well since the beginning of 2023. By Brian Nelson, CFA We received a number of questions regarding the DOJ’s investigation into anticompetitive practices for two of the top ideas in the Best Ideas Newsletter portfolio. Antitrust news with respect to Alphabet’s (GOOG) ad search business and Visa’s (V) debit card business is nothing surprising, but it speaks to the positives and dominance behind their business models, something we like quite a bit. Any outcome of an antitrust lawsuit is uncertain and could result in a settlement and potential other action, including divestitures. That said, as it relates to Alphabet, the potential for divestitures in its business reinforces a sum-of-the-parts value analysis … Read more

Paper: Value and Momentum Within Stocks, Too

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Please select the image below to download, “Value and Momentum Within Stocks, Too:” Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks. To download the full report, please click here (pdf). ———- Actual results … Read more

Visa Continues to Expect Low Teens Earnings Per Share Growth for the Full-Year 2024

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Image: Visa’s asset light business model throws off a lot of free cash flow, while the firm returns cash to shareholders via buybacks and dividends. By Brian Nelson, CFA On July 23, Visa (V) reported mixed fiscal third quarter results with the company missing expectations on the top line and the firm’s non-GAAP earnings per share coming in-line with the consensus forecast. We’re not reading too much into the company’s mixed fiscal third quarter results and remain fans of the company’s competitive positioning and asset light business model. During the quarter, net revenue advanced 10%, while GAAP net income increased 17% and GAAP earnings per share increased 20% on a year-over-year basis. On a non-GAAP basis net income increased 9%, … Read more

JPMorgan Chase’s Return on Capital Shines in Second Quarter

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Image Source: Hakan Dahlstrom By Brian Nelson, CFA On July 12, JPMorgan Chase (JPM) reported second quarter results that beat expectations on the top line, but came up a bit short on the bottom line. Managed net revenue came in at $51.0 billion, up 20%, while the company’s provision for credit losses swelled to $3.05 billion. Net income was $18.15 billion in the quarter, resulting in earnings per share of $6.12. Net income excluding significant items of $13.1 billion was $4.40 per share. Return on common equity was 23% in the quarter, while return on common equity was 28%. CEO Jamie Dimon’s commentary on the quarter is found below: The Firm performed well in the second quarter, generating net income of … Read more

Visa Benefiting from “Stable Consumer Spending”

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By Brian Nelson, CFA On April 23, Visa (V) reported fantastic second-quarter results for its fiscal 2024. Both net revenue and GAAP net income increased 10%, while GAAP earnings per share advanced 12%. On a non-GAAP basis, net income advanced 17%, while earnings per share leapt 20%. Payments volume increased 8% in its fiscal second quarter, while total cross-border volume increased 16% on a constant-dollar basis and processed transactions advanced 11%. We liked the quarter and commentary from management:  Visa delivered strong results in the second quarter, with net revenue up 10%, GAAP EPS up 12%, and non-GAAP EPS up 20%. Overall payments volume grew 8% and cross-border volume grew 16%, driven by stable consumer spending. As we head into … Read more

Understanding Stock Splits

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By Brian Nelson, CFA There are few financial topics more misunderstood, in my opinion, than stock splits. Some investors believe that a stock split is a value-creating endeavor brought about by “market forces” that have blessed their company’s stock for one reason or another. They believe that they will get more shares of the company at the same price, thereby doubling their investment value as a result. Unfortunately, this is not correct. In reality, a stock split is a move made at the complete discretion of the company’s board to reduce the nominal price of the company’s shares such that more individual investors can “afford” to buy more of the stock (increasing its ownership base). The primary reason stems from the common belief … Read more

Merger Mania

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Image Source: Glenn Beltz By Brian Nelson, CFA Mergers and acquisition [M&A] activity continues as the market sets new highs. Elevated borrowing costs as a result of the Fed’s aggressive rate hiking cycle in 2022 are pushing many entities to pursue all-stock transactions. We’ve previously discussed our thoughts on the Cisco (CSCO)/Splunk (SPLK) tie-up in this article here, which was an all-cash deal, but several other rather large acquisitions have been announced that are worth bringing to members attention. On February 19, Capital One (COF) announced that it would acquire Discover Financial (DFS) in an all-stock $35.3 billion deal that would represent a 26.6% premium over Discover’s price as of February 16. The deal is expected to generate $2.7 billion … Read more

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?

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Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. By Brian Nelson, CFA We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key … Read more

Earnings Roundup: V, INTC, HUM, PYPL

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By Brian Nelson, CFA Visa (V) Operating and Free Cash Flow Margins Remain Robust, Consumer Spending Remains Resilient Image: Visa’s operating margins are phenomenal. Image Source: Visa On January 25, top-weighted Best Ideas Newsletter portfolio holding Visa reported excellent first-quarter fiscal 2024 results that beat on the top and bottom lines. Net revenues advanced 9% on a year-over-year basis, while the firm was able to drive non-GAAP net income 8% higher and non-GAAP earnings per share 11% higher. In the quarter, payments volume advanced 8%, cross-border volume advanced 16%, and processed transactions increased 9%, all on a year-over-year basis. The company’s operating margin came in at an impressive 69% in the quarter, and it hauled in ~$3.35 billion in free … Read more