The Rally Remains Unstoppable

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Well, things didn’t cool down during the recent week. The Dow Jones Industrial Average just had its best week of the year — even after a 0.77% drop yesterday. The S&P 500 rose about 2.3% for the week, while the Dow notched close to 2% gain. The tech-heavy Nasdaq did even better with about 2.9% gain. Keith Lerner at Truist believes that stocks are in a positive trend after breaking out from their all-time highs. - “It’s a digestion period after a really strong week,” said Truist’s co-chief investment officer Keith Lerner of Friday’s moves. “Our view is that the overall trend is still positive for the market, especially when you see this breakout of new highs, on track for your fifth consecutive month of gains.” Truist’s co-chief investment officer Keith Lerner (Photo: CNBC) The rally was briefly on hold before the Federal Reserve’s FOMC meeting, but Fed officials restored the confidence in the markets by reaffirming that rate cuts will still happen this year — despite a recent acceleration in inflation. Envestnet’s Dana D’Auria believes Wall Street may be “overexcited” about three rate cuts because Fed Chair Jerome Powell didn’t guarantee a June rate cut. So, there might be fewer than three rate cuts this year due to sticky inflation. - “The market is getting a little overexcited,” said D’Auria. “I don’t interpret the comments to mean that we necessarily get that rate cut in June.” - “Powell is trying to thread the needle between not letting the market expect too much but also not disappointing the market,” she said. “Unless the data support a cut, I don’t necessarily think we will get one.” Yesterday’s earnings were mixed. FedEx soared more than 7% after beating earnings expectations, while Nike (-6.9%) and Lululemon (-15.8%) fell on disappointing guidance. This is the same story that we’ve seen in the last few weeks. Some companies are doing well, while some others are struggling. Rather than an overall direction, there seems to be a rotation among sectors where some will perform better than others throughout the time. The “Forever” Stock To Own For Decades Today’s Stock Pick: Visa ([V]( If there’s such a “forever” stock, Visa is that stock. Visa takes a small percentage of every transaction that travels on their network. If you pull out your debit card, you are likely to see either Mastercard or Visa on the card. So, their business is similar to a toll booth. Absurd profit margin: You’d be shocked by Visa’s profit margin. In 2021, Visa processed 212.6 billion transactions globally, generating revenue worth $32 billion. And guess what? Visa earned $17.3 billion in net profit – a profit margin of 54%! (Source: Visa) By now, you can anticipate that Visa is set up to reward shareholders fabulously, and you’d be correct. Visa has increased dividends every year since 2008. It hiked the dividends by 17% in 2021. Moreover, Visa bought back about 1-2% of its shares outstanding annually since 2014. (Source: MacroTrends) If you combine Visa’s rock-solid earnings growth (double digits a year) with dividends and share buyback, you may be looking at 15%+ a year returns with very small risk. Insane competitive moat: This niche is obviously lucrative, and it is astonishing to see how much Visa is dominating this niche. Visa had 52% of the credit card market share by purchase volume in 2022! The second competitor is Mastercard with a respectable 24%. That’s right – Visa has two times bigger market share than the second competitor. Visa and Mastercard also combined to dominate the market in 2022 with over 75% of spending by purchase volume. (Source: Motley Fool) International growth opportunity: Many think of cryptos as the future of payments. This might be true. Visa is all over in this space. It partnered with Coinbase to offer credit cards. Same thing with Buy Now, Pay Later where Visa partnered with Affirm. It might be a multi-decade growth opportunity, but it still has a long way to go to make a dent in Visa’s revenue. The true growth opportunity lies in the international markets. Many countries still rely on cash to make payments. For example, Latin America had more cash volume than payment on Visa credentials until a few quarters ago. Visa is growing rapidly in these countries with its acceptance locations in Latin America rising by almost 30% in the past year. The presence in India grew by 30% in two years since 2019. Future guidance: Visa forecasted its net revenue to grow at the “high end of high teens.” And the growth would be higher if the cross-border recovery is more robust. That means 18-19% revenue growth. With its operating leverage, the earnings growth can easily reach 20%+. Bottom line: Visa is a dream business that has an absurdly high-profit margin in a nearly endless market. It also holds a massive market share that promises to stay large for years to come. Through EPS growth, dividends, and share buybacks, you can safely assume that Visa’s stock can generate 15-20% a year with a small risk. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](