Should You Invest in Visa?

by Kevin on March 25, 2008

I noticed that Visa (V) IPO came out earlier this month. I had been meaning to track this more closely, but let it slip by. When I heard that it was already trading around $60/share, I could feel my emotions change a bit. Anxiety kicked in — had I missed a great deal? Was it too late? What could I do to get ‘in’ on this deal?

We have a stock and mutual fund sitting in a taxable account with Firstrade. This was leftover money from our house down payments. I am waiting for the stock to recover some of its value, and for the mutual fund to go back up due to the market fluctuations recently. As I sat here at my computer pulling up information about Visa, I began pondering the use of this money. I could sell both, take the proceeds, and buy some Visa stock. It’s bound to go up, right? I mean, look at Mastercard!

Woah, tiger. Let’s slow down for just a second. That’s the thing about investing… your emotions get involved. Let’s take a look at Mastercard (MA).

mastercard stock

It’s kind of hard to see on the above chart, but since Mastercard went public in 2006 the share price has gone through the roof. It looks like Mastercard came out at around $45 per share. The current price? $216.50 as of yesterday’s close. Wow. That’s $171.50 per share in growth, or 381% in about two years. Not half bad, even by Warren Buffett standards.

So Visa is going to do the same thing, right? Not necessarily. This is what your brain is telling you. It sees the positives of Mastercard as well as the similarities in the businesses. Skipping all other logical thinking, it encourages you to go ahead and invest… and soon! However, these are two completely separate firms. There is no guarantee Visa is going to earn you 381% returns within the next two years.

Don’t get me wrong, I think Visa is a great business. I wish I owned it. But trading in a broad mutual fund plus one stock to get only one stock is foolish. This isn’t play money we’re dealing with here. So for now, I sit on the sidelines. Sticking to our plan. Sticking to our 2008 goals. There will be other stocks in the future that I will invest in. That is a few years down the road, maybe even decades. The bottom line is to keep your emotions in check when investing.

That being said, if I had the abilities to invest in individual securities, I would invest in Visa. Have any of you out there bought some Visa stock?

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August 21, 2008 at 3:31 pm

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Cinder March 25, 2008 at 7:28 am

Worst case, I doubt it’ll lose value in the long term. I put a hundred shares in my regular brokerage account this past week.

I’ll wait it out for at least a year and see what it does, for better or worse.

bumptious96 March 25, 2008 at 8:32 am

I bought some when it opened. It should sit around its current price for a while if you want to jump in. I’m long. I doubt it will outperform MA for a number of reasons (look at their comparative P/E at their respective openings). But, I do think there’s value to get in within the next couple of weeks before it starts to gain some traction.

Fiscal Musings March 25, 2008 at 9:50 am

I’m thinking about buying some in my Roth IRA with Scottrade. Right now I’m tracking it until I look into it a little further.

cyber_rigger March 25, 2008 at 11:24 am

I get an eerie feeling about a Visa IPO at this time considering the general credit crunch.

Why would Visa need to expand now?
They are already worldwide.

Visualize 30% of Visa’s credit card customers going bankrupt.

How could Visa raise money to bail out their business.

Hmmm.

What would needing a bailout do to their stock price. And what would happened if they didn’t mention the bailout until well after the IPO?

It looks like Visa directors are getting some freebie shares to play with, i.e. paid with stock paper not cash.

http://finance.yahoo.com/q/it?s=V

This is all just my gut feeling. Do your own research.

Ed March 31, 2008 at 5:10 pm

I wanted to get in on the opening, but I do not have the “resources” to get in on an IPO. I believe I will purchase 2 weeks (April 2nd or 3rd) after the IPO, when restrictions are released and the stock should drop a tad. I would hold for the long haul.

Chad April 22, 2008 at 3:21 pm

Visa is a company that makes money off of transactions. In regards to interest rates and bankruptcy, the banks carrry that responsibility. So hypothetically, lets say no one can pay their visa, it’s the banks that are in trouble not Visa.

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