Bank of America/Merrill Lynch's top financial stock pick added to this updateBOSTON ( TheStreet) -- William Blair's financial stock picks for 2011 were a disaster, trailing the broader market by a wide margin, as the industry suffocated under tighter regulations and lower interest rates. But the Chicago-based investment bank, which manages more than $45 billion in assets, is looking to recover in 2012 with financial stocks like MasterCard ( MA), which has soared 66% this year, and Aon Corp. ( AON), up 13%. William Blair every year offers the top stock picks from individual sectors. In 2011, the firm's selections in the financial sector had the worst performance, falling 25% from Nov. 26, 2010, through Nov. 25, 2011. That compares to a slide of 18.7% on the S&P 500 Financials Index.
Visa ( V) Company Profile: Visa is the global credit card company. Share Price: $95.69 (Dec. 6) 2011 Return: 36% Investment Thesis: "Visa is well-positioned to continue to capitalize on the electronic payments secular growth trend," William Blair analysts write of Visa, noting that secular growth of electronic payments is expected to average 10% to 12% globally over the next several years. The analysts also say that Visa also enjoys very high incremental margins, which contributes to the company's attractive margin profile (59% in fiscal 2011) and strong free cash flow. "Visa has a strong balance sheet and generates strong cash flow," the analysts write. "Visa had about $4.1 billion of cash and investments, $2.9 billion of litigation reserves, and no debt on its balance sheet as of Sept. 30, 2011. Guidance calls for more than $4 billion of free cash flow in fiscal 2012."