You’d have a hard time finding a bigger crypto currency bull than me.
After all, I was one of the very first tech analysts to suggest buying Bitcoin (BTC). I first began telling investors of the bright future for this digital money in the summer of 2013.
Back then, Bitcoin was trading for under $100. It went on to hit nearly $20,000 before sharply reversing. It has since rebounded to roughly $8,700.
And on May 17, I suggested that you invest in another leading crypto, Ethereum (ETH). It boasts the crypto world’s second-largest market cap at $20.5 billion, and is a great play on the emerging world of smart contracts.
So, you might be wondering why today I’m telling you about a fintech leader that is largely avoiding cryptos and their backend technology.
Here’s the thing. The company I’ll reveal today is already involved in $7 trillion worth of transactions and shows no signs of slowing down.
That’s why I want to give you five reasons while this global giant will pile up market-crushing gains…
Let’s get on thing cleared up right now. The fintech space has a massive upside.
Indeed, the global economy now measures $70 trillion. It may take a few years to get there, but I believe that the vast majority of those goods and services will be paid for digitally.
And even if only 10% of those payments were settled like that, as opposed to paying by check or cash, we’d still be talking about a huge market.
That’s why I think Visa Inc. (NYSE:V) is such a great investment. In Fiscal 2018 alone, the firm processed $7 trillion in payments.
Ironically, because the firm has 4.2 billion cards in circulation carrying its logo, most investors think of this as a play on consumer loans.
Nothing could be further from the truth. Visa doesn’t make its money off of interest charged to consumers.
Instead, it boasts a massive fintech payments platform and gets a slice of the action. Last year, it processed a stunning 182 billion in transactions, or roughly 498.6 million a day.
Here’s the thing. Visa currently has almost no exposure to blockchain, the technology behind cryptos. Or any digital coins for that matter.
In this case, that’s actually good. It gives us a way to hedge our bets.
Cryptos and blockchain are for the aggressive portion of your portfolio. Visa is much more of a stable foundational play on the future of digital transactions.
But when it comes to investor returns, it’s hardly boring. The firm is practically minting money for investors.
With that in mind, let’s run it through my five rules for finding market-crushing tech leaders.
Take a look:
Tech Wealth Rule No. 1: Great companies Have Great Operations. These are well run firms with top-notch leaders.
As a CEO, Alfred F. Kelly, Jr., brings deep banking and payments experience with him. He became CEO in 2016 after a distinguished career at American Express.
His other experience includes a stint working at Ronald Reagan’s White House in the mid-1980s, running the 2014 Super Bowl Committee, and the 2015 Papal Visit Committee.
He’s doing a great job at Visa. The company boasts a return on equity of 32.5%, and operating margins of 66%. It generates levered free cash flow of $10.6 billion a year.
Tech Wealth Rule No. 2: Separate the Signal From the Noise. To create real wealth, you have to ignore the hype and find companies that have rock-solid fundamentals.
This is one of those growth stocks that got hammered last fall when the market started selling off. At the time, Wall Street feared the U.S. economy might enter a recession and clip Visa’s wings.
From Oct. 1 until the stock rebounded with the rest of the market on Dec. 24, Visa slid by more than 19%. As a big-cap leader, it was a stock that actually helped push the market lower.
Since the market rebounded on Dec. 24, the bellwether S&P 500 has regained by 20.2%. By contrast, Visa is up 33.6%, beating the market by more than 66% during the period.
Tech Wealth Rule No. 3: Ride the Unstoppable Trends. Look for stocks in red-hot sectors because they offer the best chance for life-changing gains.
Turns out, Visa scores highly here as well. The overall global fintech sector grew by nearly 54% a year starting in 2016, according to Research and Markets.
Though Visa is a global concern, its U.S. operations benefit from the fact that the domestic market accounts for 57% of the segment’s value. Visa owns 4.2 million shares of point-of-sale and app leader Square Inc. (NYSE:SQ).
It’s also benefitting from the shift to mobile payments. Visa has partnered with several firms that use smart phones or other devices for transactions including Apple, FitBit, Google, and Samsung.
And while I’m speaking about unstoppable trends, you probably know about cannabidiol, or CBD, the non-intoxicating compound found in hemp and marijuana that users say brings relief for a host of health issues, from pain and inflammation to insomnia.
Well, last December, both chambers of the U.S. Congress passed the “Farm Bill” by landslide margins. That bill allows for the cultivation of hemp in the U.S., so hemp products can be produced and moved across state borders for the first time.
Cannabis companies are now on the move to start mass-producing CBD in America as we speak.
But there’s one little-known firm at the heart of all. And it could help you become a CBD millionaire.
Tech Wealth Rule No. 4: Focus on Growth. Companies that have the strongest growth rates almost always offer the highest stock returns.
Over the last three years, Visa has grown its sales by roughly 16%. That means it’s moving at a rate that is almost exactly five times faster than the overall U.S. economy.
To be sure, first quarter sales for Visa dipped slightly below that three-year average. I’m not concerned because most companies have swings on a quarterly basis.
The company reports earnings on July 23, so we’ll get a feel then if Visa’s sales once again meet their historic average. With the economy in high gear, the near term is looking bright for this payments leader.
Tech Wealth Rule No. 5: Target Stocks That Can Double Your Money
This is where we look at the firm’s earnings growth and see how long it will take to double profits. By doing that, we can figure out how long on average it should take for the stock to roughly double.
We have a real winner on our hands with this metric. After pouring through the financials in details, I’m projecting that earnings per share will grow at an average 22% a year.
That’s a slight discount from the firm’s recent track record. See, over the past three years, the firm has had grown per-share profits by 25%. I’m shaving off roughly 10% to account for possible slowing growth of the U.S. economy.
Now we use what I call my doubling calculator. Mathematicians call it the Rule of 72. Let’s divide the compound profit growth rate of 22% into the number 72.
We find that it should double in just a little more than three years. With a $326 billion market cap, the stock trades at roughly $163.
This is one of those stocks where it really pays to go beyond the daily headlines and look for hidden ways to profit from our huge jobs boom.
But it won’t stop there. Visa is the kind of well-run firm that will keep building shareholder value and stock profits for many years to come.
Cheers and good investing,
Michael A. Robinson