Visa: The Swan That Was Here And Gone

It looks like Visa is a lover that does not stay the night. After closing on Friday at $71, the price of Visa collapsed quickly in Monday’s early morning trading to open at $64, come down to $60, and now, at the time of this current writing, the price of the stock has already bounced back to almost $70. It’s not even a 2% decline for the day. What started off as a significant one-day haircut ended up becoming a pedestrian garden variety trading day.

If you live on the West Coast and didn’t wake up until 8:30 local time, the entire fluctuation in the price of Visa’s stock came and left before you even got a chance to wake up. It puts me in an unfamiliar position–I’m not used to issuing one-day updates on the price of a company’s stock since long-term investing is usually immune to the need for constant updates.

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Royal Dutch Shell Now Offers A 7.5% Dividend Yield

I’m trying to find some free time in my day to put out a couple of quick posts on some of the opportunities that have become available in today’s significant market sell-off (that is a continuation of a selloff that began last Monday).

As someone who has been writing investment articles publicly since 2011, I haven’t been around long enough to write during a deep recession. But I have not been prevented from developing the right mindset that someone should maintain when a stock market correction does arrive.

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Stop What You Are Doing And Buy Visa Stock Right Now

Wow. I guess my conversation about stock market volatility was better timed than I thought. As far as I can tell, some of the greatest companies in the world are now trading at 5% to 10% discounts to fair value. Diageo at $101. Hershey at $84. Coca-Cola at $36. Exxon at $69. Johnson & Johnson at $90. General Electric flirting with $22. Pick any of the above, hit the reinvest button, hold for a very long time, and you’ll be happy with the results.

However, the stock that has especially caught my attention is Visa. Out of all the companies in the Dow Jones, it has the greatest earnings per share growth characteristics. I think it would be quite difficult to come up with more than five other companies that are worth more than $150 billion that are growing revenues at a rate north of 10%. The balance sheet is perfect, and earnings per share growth is somewhere in the 12-15% range. Visa is exactly the kind of company that leads to significant increases in net worth when held for decades.

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The Investor Community’s Fear of Volatility

When I spent one summer teaching a math course to elementary school students that had a personal finance component to it, I was dissatisfied with the type of material that I was assigned to teach. I was supposed to have students answer True/False questions with information like the following: T/F Bonds are safer than stocks. The correct answer, according to the handout, is bonds under the theory that the relatively less volatility is proof of superior safety.

I understand that you have to start somewhere, and introductory information should be easy to grasp. Oversimplification comes with the territory. The problem is that the introductory information has the greatest consequences of you learn it wrong–initial impressions are the hardest to overcome because they serve as the foundation base–and can’t be weeded out as easily as false information acquired deep into a professional career when you already have a process for correcting erroneous information that slips into your mind.

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The Wild Decline of Chevron’s Stock Price

When you read Charlie Munger’s biography by Janet Lowe (“Damn Right”), you will frequently encounter the financial premise that dominated Munger’s thought process from the age of thirty onward: he sought ownership positions in assets that pounded out cash. The spectacular personal success was the result of being patient enough to get a good price on those very assets that pounded cash.

The unique aspects of Munger’s life is that: (1) he did not mind the subsequent volatility of stocks he purchased, often seeing some of his stocks slide more than 50% after he made his initial purchase, and (2) he got in the business of using money to make more money, taking income from undervalued cash-generative assets to buy other assets that meet the same conditions. As time passes by, you get to reap the benefits of receiving income from the original assets that paid dividends and then you get the new assets that create regular income as well.

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