To The Moon

$Visa(V)$

Market Panic Over Tariffs

Everyone’s in a frenzy over the new tariffs. They came in much higher than expected, and now the stock market is feeling the heat. Fear is spreading, and many investors are concerned that this could be the spark that leads us into a recession or, perhaps even worse, a period of runaway inflation. The typical reactions from the market are to sell off stocks, pull back, and brace for impact.

Investor Questions: How to Position for the Current Climate

In the midst of this chaos, I've had countless investors ask me, "What do you think is the best way to position for this? What's the best stock to bet on with these new tariffs and inflation worries?" It's a great question, and I know there’s a lot of debate going on about where to place your bets in this environment. There’s no shortage of ideas out there, with people suggesting gold miners, commodities, oil stocks, or agricultural companies that could benefit from higher U.S. exports as a way to balance out the trade deficit.

My Surprising Stock Pick: Visa

Now, all those ideas make sense on some level. If inflation hits hard, we’ll likely see commodities, like gold and oil, surge. So, it’s not a bad bet to buy into gold miners if you're expecting inflationary pressures. But after thinking this through for the last couple of days, I’ve realized something: I actually already own the perfect stock to benefit from the very trends people are worried about right now.

And no, it's not a gold mining stock, nor an oil company. It's something that many of you probably already know and may even use daily. It’s Visa.

Why Visa Is the Ultimate Inflation Play

Here’s the thing: Visa’s stock has taken a nearly 11% hit over the past five days. And I get why — tariffs are higher than expected, and inflation fears are on the rise. But here’s why I see Visa as the perfect stock to benefit from this environment.

First, let's talk about Visa’s business model. Visa (and Mastercard) earn a fixed percentage on every transaction processed — typically between 1.5% to 2.5%. This fee is essentially a "tax" on all the transactions that pass through their networks. Now, if prices on goods and services go up — say, by 20%, 30%, or even 50% — Visa doesn't need to raise its fees. The higher transaction value simply means Visa collects a higher dollar amount without lifting a finger. They just collect a larger slice of the same pie. That’s why, in an environment where inflation pushes prices higher, Visa's revenues could rise dramatically without them having to adjust a single fee. If prices go up due to tariffs, Visa stands to benefit massively.

Visa's Resilience in a Tough Economy

Now, I know some of you might be thinking, “But won’t people cut back on spending if things get more expensive?” That’s a valid concern. But let’s look at how Visa performed in a similar environment. In 2022, when many were predicting a recession, rising inflation, and high interest rates, Visa still grew its earnings per share (EPS) by 27%. This kind of growth, especially in a tough environment, is rare and shows that Visa’s business is incredibly resilient. In fact, even when inflation was high in 2021 and 2023, Visa was able to grow its EPS by 17% each year. So even if volumes were to decline slightly in a tough economy, Visa can still pull in strong profits simply because they capture a fixed percentage of every transaction, and essential goods — groceries, utilities, things people can't live without — will still be bought. People will pay more for these goods, and they’re going to use credit and debit cards to do it.

Visa's Strong Financials and Growing Revenue

This is why I believe Visa is the ultimate stock to benefit from higher inflation. Yes, there could be some decline in overall transaction volumes if we hit a rough patch, but we’ve seen time and time again that Visa can thrive even in tough economic environments.

Let’s dive deeper into the fundamentals of the company. Visa has a 56% net income margin — that’s higher than Microsoft, better than most of your favorite tech stocks, and one of the highest in the business. Their return on capital is an impressive 36%, and that number has been growing almost every year, which is a solid indicator of the company's strong financial health and the efficiency of its business model. To put it simply, Visa is a cash machine.

On top of that, Visa has minimal debt. They’re a company with almost no leverage, which makes them financially flexible and less vulnerable to interest rate hikes or credit market turbulence. They return a lot of their cash flow to shareholders in the form of buybacks and dividends. Visa buys back about 2% of its market cap every year, and their shares outstanding have steadily decreased since 2013 — this is fantastic for shareholders, as it means your ownership in the company is increasing over time. While their dividend is small, their consistent buybacks more than make up for it.

Expansion Beyond Traditional Services

One of the things that stands out most about Visa’s performance is their ability to grow their "other revenues" — this is the money they earn from licensing their data and other partnerships. These revenues are up a staggering 32% year-over-year, and it’s helping to offset the slower growth in their traditional services and fees. This diversification within their revenue streams makes Visa even more appealing, as it provides an extra layer of growth and stability.

Visa’s Long-Term Growth Potential

Now, I know Visa is a massive company with a market cap over $500 billion, but despite that, they’re still growing at an impressive pace. Their earnings per share (EPS) grew by 16% last year, and payment volume continues to expand across credit, debit, and other services. This growth shows no sign of slowing down, and that’s why I believe Visa is still an excellent long-term investment.

At its current P/E ratio of around 27, Visa isn't exactly "cheap" — but it’s still attractive relative to its historical average of 28. If you look at their projected EPS growth, which could be 12% to 13% annually, a 27x multiple doesn’t seem out of line, especially when you consider the stability and growth potential of the business.

The Case for Buying Visa at a Discount

But here’s where things get interesting: If we enter a higher inflation environment due to the tariffs, Visa’s earnings growth could spike well beyond the 12–13% range, and we could see it hit 18–20% in earnings growth — similar to what they saw in 2022. This would create a very favorable situation for investors.

Personally, I think Visa is fairly valued at around $310 per share, but if it dips to 24x earnings — roughly $270 per share — I’ll be jumping in with both feet. That’s where I bought my original position, and if we see a pullback, I may even double down. With tariffs on the rise and inflation fears taking hold, I think the market is overreacting, and Visa is the best stock to own in this environment.

Conclusion: Visa’s Advantage in an Inflationary World

To summarize Visa is my top pick for benefiting from tariffs and inflation. The company has a dominant position in the payments space, with one of the widest moats around, an incredibly strong balance sheet, and a proven ability to grow even in challenging times. As tariffs drive up prices, Visa will be a massive beneficiary, collecting higher fees without raising its own rates. While the market is panicking, this is the best time to buy Visa at a reasonable price. I truly believe this stock could make a killing in the years to come.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

@Daily_Discussion @TigerPM @TigerObserver @Tiger_comments @TigerClub