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Visa IPO: How to profit from a historic American IPO

Posted March 15, 2008

"You have a number of options to profit from Thursday’s Visa IPO. First, you could simply try to buy shares in the aftermarket. In a best-case scenario, you would buy at or near the issue price and watch your shares go up followeing the same trajectory as MasterCard or, even better, Google. But there are two more ways to profit…"

Updated Tuesday, March 18, 2008, 1:15PM

 

A TodaysFinancialNews.com Special Report:

by J. Christoph Amberger, President TFN

Baltimore — (TFN): Two years ago, MasterCard launched its initial public offering (IPO). Its stock price rocketed from $43 to more than $200.

For the past few weeks, the markets have been buzzing with speculation about Visa issuing its own IPO. With greater market share and reach than MasterCard, Visa’s $18.8 billion IPO, which was rescheduled for Wednesday, March19, 2008, would be the biggest in U.S. history.

So should you bribe your stockbroker to do all he can to get you in on this IPO at any cost?

Hang on a sec ! In a market virtually frozen by credit and bank woes, and tumultuous economic uncertainty, there are a few things to consider before you start chasing the Visa IPO.

Visa IPO has some compelling arguments in its favor

Sure, unlike Capital One and Discover, Visa is a card processor, not a lender. That means it takes money from the banks that issue cards and doesn’t extend credit. Smart move:  As of November 2007, credit card debt had soared at an 11.3% annual rate, following an 8.5% rate of increase in October. In 2008,  it’s still on the rise.

Also, the record low dollar has made the top American assets a steal for foreign investors.

Sovereign funds are already slavering at the prospect of slicing themselves a huge serving from the American consumer pie. especially the Kuwait sovereign fund, which has become increasingly interested in making investments in European and U.S. financial services and real estate companies. And the Kuwaiti fund is now looking to take a major position in Visa’s IPO, says our associate William Patalone.

On the other hand…

Not all analysts are bullish on the IPO, however. After all, financial-service companies have been taking it on the chin since the subprime crisis started to percolate through the markets in February 2007.

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“Don’t be suckered in!", warns TFN’s own Andrew Snyder:  "Don’t forget, Visa recently announced that it lost $861 million last year, on revenues of over $5.2 billion. Numbers like that do not deserve the $38 billion market cap Visa is expecting. Stay away from this one, at least until it sheds its early overvalued price."

(Watch Andrew’s video for his full analysis!)

How to profit from the Visa IPO

You have a number of options to profit from Thursday’s IPO. First, you could simply try to buy shares in the aftermarket. In a best-case scenario, you would buy at or near the issue price and watch your shares go up following the same trajectory as MasterCard or, even better, Google.

There is the distinct chance, however, that the stock may quickly follow the overall market downward, especially as the underwriters and investment bankers begin to take quick profits off the table.

There are other options besides trying to buy Visa shares for playing this IPO, however.

Diligent Investor’s Ann Sosnowski still believes that “Visa could very well be the most sought after and most powerful IPO stock the world has ever seen.”

Her recommendation:  Use this “secret” IPO Fund to buy Visa’s upcoming new IPO.

Small-Cap Trading Pit’s Ian Cooper has selected another strategy to profit from the IPO — without exposing yourself to the volatility of the IPO itself:  "The biggest beneficiaries of Visa’s IPO will be the Bank of America, Wells Fargo, and JP Morgan. Each stands to reap millions if they sell their stake, post-IPO. Citigroup and JP Morgan Chase cashed out their holdings post-MasterCard IPO and took one-time gains of more than $100 million."

Ian selected an index that tracks U.S. IPOs. It has taken a steep dive since December 2007. But there’s not much the stock can do when $21.4 billion worth of IPOs have been shelved since the start of the year. To get his recommendation, click right here.

We will be updating these profit strategies over the next couple of days as the Visa IPO approaches. Make sure you keep in touch with our coverage. We’ve made it as easy as possible:  Simply pick your favorite reader. Or if you prefer, you can have the feed delivered to your email. 


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Posted by TFN-Investment Strategies · Filed Under US Stocks and Markets 

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