The gyrations of the stock market in recent days are a powerful reminder of how unpredictable investing can be. After posting gains for most of 2016, U.S. stocks tumbled Friday after a Federal Reserve official suggested that the U.S. central bank might raise its key interest rate sooner than expected.
If such a small event can rattle investors, then you can't just rely on the market to generate returns. You must find solid companies that are industry leaders and have recently made sound strategic decisions.
Visa(V) - Get Report , the credit card company, has been a worldwide leader for many years, and its moves over the past year have only strengthened its position. Visa shares are up since the start of the year, and rose more than 2% in Monday trading.
For example, Visa announced earlier this year that it had signed a Memorandum of Understanding with the state-run Chinese payment services company China UnionPay. In a Feb. 25 press release, Visa and China UnionPay agreed to work together on "security, innovation and financial inclusion. The agreement will give Visa an opportunity to gather data on the spending habits of hundreds of millions of consumers and to establish a more robust presence in the world's most populous country.
China UnionPay has about five billion payment cardholders, the card is accepted in more than 150 countries.
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In another development, Visa made a deal with Paypal Holdings that could improve the market position of both companies. Paypal will encourage customers to use Visa and boost their spending.
Braintree, a PayPal company that powers payments for companies like Airbnb, Eventbrite, Pinterest and Uber, enables merchants to accept a variety of payment options online, in app and in-stores, and soon Visa Checkout will be available as one of Braintree's payment options. The online payment service allows Visa cardholders to pay on any connected device in just a few clicks, using their Visa accounts.
Paypal has more than 188 million active customer accounts. In return, Visa will help Paypal expand its reach into physical stores.
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In yet another deal, Visa and Uber have begun a new partnership called Uber Local Offers, a new way for riders to earn discounted rides by simply using the same Visa credit card on file with Uber at their favorite local merchants. Uber riders earn one point for every dollar they spend at enrolled merchants.
These smart moves have paid off. Visa reported strong third quarter results in July. Overall revenue grew 3% to $3.6 billion. This came from large increases in transactions (up 12%) and data processing revenue (up 10%). Earnings per share are expected to increase at a double-digit percentage rate.
The company also announced a new $5 billion share buyback. Visa bought 21.7 million shares for $1.7 billion in the third quarter, at an average share price of $77.53. The firm has $12.4 billion in cash and strong cash flow.
Meanwhile, Visa's chief rival, MasterCard, is facing a huge lawsuit over claims that it ripped off consumers in the United Kingdom by charging excessive fees on store transactions for more than a decade. American Express is a solid company, but it has a somewhat different target market and business model from Visa's.
Visa has been around for decades, but it has shown the ability to partner successfully with newcomers like Uber and PayPal. The lesson: If you don't take advantage of new opportunities as soon as they come along, someone else will. Our top analysts have developed a system that will enable you to win on more than 80% of your trades - guaranteed. For more information, just click here!
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.