Again and again I hear talking heads on the boob tube talking about how sitting on a diversified portfolio over the long haul is a great way to invest your money. And while that’s a safe bet, unless you get lucky, the chances are pretty good that you’ll never make a ton of money doing that.
If you want to make good money you have to catch the waves. You have to keep your money moving in and out of the opportunites as they come along.
It’s not fire-and-forget. You have to get in the game. You have to get involved in your own investing.
There are two kinds of stock plays I really like:
- Buying small to mid caps on bad news
- Can’t-lose IPOs
Both of those plays will give you better than average returns. And you can make anywhere from 200% on your money in a couple weeks to 500%+ in a year or two. A lot better than the run-of-the-mill 10% annual return you’ll make in a diversified mutual fund.
IPO Plays
There are lots of IPOs, but every once in a while something really good comes along.
It’s been 3 years since Google went public and it’s rocketed up 700% since then. And it was pretty much a sure bet from the very beginning. The barrier to getting in now is the high price and the question of how fast Google can continue to grow. They will grow, but how quickly they grow is what will determine the price (and the returns) over time.
Another great play happened last year. Mastercard, the number 2 credit card processor went public in May 2006. It opened up at around $40 a share and after a year and a half it’s up to almost 200 bucks. Sweet. But again, how fast will they keep up this pace of growth.
Don’t you wish you got in at the very beginning. Enter Visa …
Visa is the number one credit card payments processor in the world. And they’re set to launch their IPO early next year (February I believe). I haven’t read too much about the pricing but I would guess it’ll be anywhere between $60-100 a share.
Now I know what you’re thinking … credit card debt is a bad scene right now. The bottom could drop out of the stock if people don’t pay their CC bills right? Not so fast.
Like Mastercard, Visa is a payments processor. They collect fees for processing the transactions but they don’t lend money. They don’t take on that liability, the banks do. So if the economy is good, people are out spending and using their credit cards … yay Visa. If the economy is bad, then people rely on their credit cards to weather the storm … yay Visa.
If you’re looking for a place to park some cash for a couple years and get a good return, the Visa IPO is looking like a good place to do that.
Who says credit cards are a bad thing.
You’re right, Shane. I should go for a 10…why settle for just a 9? 🙂 I too am looking forward to the Summer Games in China, and think that Visa’s sales have the potential to rise, but I guess we’ll have to wait and see. I think that for now, the most likely date to see something positive happen to it, is that last Wednesday of July (the 30th). Here’s hoping that before then, it can sit comfortably in the mid 80’s, so that if it spikes up, it goes up considerably higher than it did before.
And to Russell, wow, 10,100 shares is a lot of Visa. Good for you!
Uh oh, Shane…things are looking very, VERY scary. $68.65 a share is a huge loss. I’ve always been cautious, but now I’m starting to get really worried. Do you still think that things can change enough for the good come July 30th?
Hey Investor,
Not moving in the direction I’d like to see … but all things considered, Visa is holding stronger than most in this very bearish market. And I still say this is a long term hold and in that sense I don’t pay too much attention to the daily swings.
If the earnings are strong on the 30th, then we’ll see some confidence in the stock and a bump up. The average expectation is $0.48 share, so if they beat that then we should see some gains. Hopefully they smash it – $0.52 and up would be very good. Of course, if they fall short … not so good.
Phew…hopefully they do meet and exceed their expectations. I tell ya, I never like to rush time, because I truly enjoy living each day to its fullest, but I am looking forward to July 30th…and a bit nervously at that.
please note that visa is a long term investment with with massive potential. for those who watch ma pass them by, visa is very similar. with more market share then all competitor combined, visa to me will most likely do very well. be patient and don’t worry about the minor up and down swings. you have to remember, the bigger investors sell and buy millions of shares with put call and options which ultimately makes the share fluctuate. july 31 when the visa reports, people will be in for a surprise. the world moving away from cash and checks, so buy visa on dips and hold and be patient this is an investment not a trade!!!!
183 shares dollar cost averaged at 78.50.. will recomment after the earnings report.
OH LETS NOT FORGET ABOUT THE OYMPICS THEY SHOULD GET A BOOST FROM BEING THE OFFICIAL SPONSOR.
Hooray for Visa, it’s been doing alright lately. It’s been a long time in the making, but it looks like we might have arrived at the first stop in destination money.
Hey Investor,
Visa had a great quarter but there’s still a lot of concern about the economy so I figure we’ll see lots of ups and downs for the foreseeable future (which I’m having a little fun with).
And I’m glad people like Jim Cramer have finally seen the light on Mastercard. That AXP settlement really hurt them, and there’s still the DFS lawsuit around the corner. I have nothing against MA – it’s an incredibly strong company with great branding and innovative marketing. I just think their profit pace is going to slow down in light of Visa going public … and of course, as we saw they never had the lawsuit provisions in place that Visa did … wiping out an entire YEAR of MA’s net income. Nasty.
As for Visa … 90,000 ATMs at the Beijing Olympics … not too shabby. We’re going to see some nice growth in that market and overall it should be a strong earner through 2009-2010.
Shane, this is getting scary! Do you have any thoughts, be it personal or what you’ve heard from other people, about where Visa is going in the next several months? Thanks.
Hey Investor,
A lot of people thought the financial sector insanity would calm down the second half of this year … but, it’s just gotten worse because of Fannie Mae, Freddie Mac, Lehman, Merrill Lynch, and now AIG. And there were a few smaller banks (not big headliners) that failed also.
The driver of all of this is the big “pop” of the housing bubble, and the trickle down effect into everything else. And there’s a ways to go for both of those things; meaning it’s going to get worse before it gets better.
Visa and a lot of other companies are stuck in this downward spiral, and I think that’s for 2 reasons. One, there’s no confidence in the markets (especially financials), and second, I think some are dumping good stocks simply because they need the cash.
It’ll probably be six months to a year before we really see a positive uptrend in the markets that actually “sticks”. There’s just too much up in the air right now.
Like I said in my last comment, I think Visa will be a strong earner in 2009 and 2010. But for the next few months, it’s anybody guess as to what will happen.
I am looking to buy Visa at a good price, I watched it roller coaster a few days ago from 58 to high 60’s, and thought of getting in sometime during that day, but decided against it for now. I am also considering buying Jan. 2010 Leaps.
Cramer says stay away from Visa until the housing market turns around, but I was wondering if waiting until then will be too late to get a good price (50’s/60’s). Cramer doesn’t think housing will turn around until the summer 2009.
Any comments would be greatly appreciated.
Hi Jeena,
Housing is going to get worse before it gets better. Regarding a target date for it to turn around, that’s harder to predict. And I wouldn’t necessarily tie Visa to housing, but it certainly is tied to the financial sector and to the economy overall.
I would say be careful with leaps/options in this crazy climate. The leverage is incredible, and you can make a lot of money with them, but you can also lose all your money.
With stocks, you have the option to sit on them and ride out the turmoil. But leaps/options start losing time value very quickly if the market is not going in your favor or is stagnant, and although I’ve made a couple bucks with options, I’ve also taken a bath on them a few times.
To give you a general idea of time value … if you bought 2010 leaps today and next summer the stock price is exactly where it is today, those options could be worth 20% of what you paid for them. Time value can be a real killer.
Shane, I last posted a comment on 7-11-08, when I held 10,100 shares of Visa. I’m currently down to 6,174 shares due to margin calls. It’s been a rough ride. I don’t even break even until $79 a share. I was up over $220,000 back in June.
Earning are due out 10-29 after the close. I’m thinking they will again report very positive numbers due in part to 08 Summer games and they have that DFS litagation settled.
I know you can’t tell the future, no one can. I know you say it’s a 1-5 year hold. I know we’ve had very unstable market for about two months now, howeverhave been a little suprised that the stock hasn’t held up better, it’s been awhile since it’s sh
showed any upward movement. Let me know any of your current thoughts, thanks, R.R.
Hey RR,
haha … well, you already know my thoughts on Visa. I still think it’s a long term hold … and yeah, I still can’t predict the future.
I think a lot of people are going to get hurt by margin calls in this climate. Luckily, I didn’t buy any shares on margin myself … but I did buy some options and leaps. The options are in the toilet. We’ll see how my Jan 2010 leaps do.
A buddy of mine bought shares at $59 and he sold at $62 when it crashed down. All in all, he’s not too happy, but he got out alive.
There are 4 things we know for sure right now:
1. The market looks like it’s at or near the bottom. But that’s honestly a 50/50 tossup. There’s a lot of things wrong, even though it looks like most of the pain has already been inflicted.
2. Markets go down faster than they go up. We could see some general stagnation for the next year or two very easily. And even if the market doesn’t fall further, time is money, and not going up hurts over time.
3. Visa is still a strong company. In general, I don’t think “bad times” are bad for Visa because people switch from using credit cards to relying on them. They also make smaller transactions on their debit cards, but not necessarily a lot less transactions. That said, consumer credit is tightening up and will continue to do so. The party’s over and that could hurt Visa’a growth for the next year or two.
4. Down markets are buying opportunities. The market will rise again. And taking the first 3 factors into consideration, as well as personal financial needs, I think people have to make a decision on whether they’re going to weather out the storm or cut their losses and run for the hills.
And what is “long term” for holding Visa? The only answer is … longer than it was.
Aaaah, how sad the last few months have been in the Visa market…and for that matter, the whole market. At this point in time, Shane, what do you think needs to happen for the economy to start turning around, again? Of course, nothing will happen over night, but in your opinion, what things do you think have to change?
Hey Investor,
If you remember the dot com crash, it was the housing bubble that turned the economy around after that. That was a good thing (short term) and a bad thing (long term), because the global economy has to reset …
A lot of the wealth in the world is speculative. It’s paper, it’s not real. The real wealth (real goods and services) in the world can only support so much speculative wealth before there’s a loss of confidence. A crash wipes out that speculative wealth and resets the system.
This crash is big. Short term that’s not good, but long term it is good because there’s a lot more room for wealth (both real and speculative) to build up.
Real wealth builds slowly; think inflation. So a real economic turnaround requires speculative wealth, it requires a hot new sector to emerge. The big question is what will it be? Probably one of the best candidates is renewable energy; wind, solar, biodiesel, etc.
If we start to see a lot of new companies emerge and money pour into this sector (or some sector), creating jobs, etc, then we’ll see the start of a real recovery. Until the next “reset”.
Hey Shane, it’s been a while. Have you heard any positive rumblings in the Visa world? Also, will Chase taking over Washington Mutual help Visa out in any way?
Hey Investor,
I haven’t been paying too much attention to the markets lately. I’m waiting for the next big “engine” to get started that will drive the market into multi-year bull territory … like I said before, I think renewable energy is a good candidate for this job … there are only so many things big enough to propel the global economy forward and that’s one of them.
Not too much of anything is going to impact Visa or any other stock as much as we’d like until we start seeing the global economy moving steadily forward again.
Hmm, what do you think about Ford and GM? Ford has nearly tripled in stock in the past month. Man…if I only pulled out some Visa loss and put it in Ford. F is at 4.20something right now, up from 1.50something. Do you think it’ll go up to 6 or could it be at its peak? Thanks.
I don’t know if GM will even survive in it’s current form – that whole 2 wheeled Segway concept car they were touting the other day was completely stupid (cool idea, bad business). I remember when Steve Jobs returned to Apple; the first thing he did was cut out all the “cool” R&D they were doing that wasn’t commercially viable. GM should take note of that.
I like Ford. They make great trucks and are certainly the most viable of the big 3. Might be worth buying some F stock to hang onto for awhile. But I wouldn’t count on it going up to $6 in a couple months … could happen, but I think it’s a good hold for a year or two.