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Visa IPO: Buy this “under-the-radar” stock now

Posted March 15, 2008

“In a market virtually frozen by credit and bank woes, and tumultuous economic uncertainty, Visa could put an end to pent-up salivating investor demand for any company not suffering from credit issues.” — Ian Cooper

by Ian Cooper

Baltimore — (TFN): 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.

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But how do you get a piece of that? Honestly, unless you have friends in high places, you can just about forget about getting into Visa pre-IPO. You’d have to wait and jump in on the Visa buying rush on the day of IPO, which may not be a bad idea.

Visa IPO: Buy this under-the-radar stock now

However, you stand to profit pre- and post-Visa IPO with “under the radar” First Trust IPOX-100 Index (FPX), which tracks the U.S. IPOX-100 Index. FPX 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.

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Look back to the MasterCard and First Solar IPOs: MA ran from $43 to $200. FSLR ran from $24 to more than $220. FPX went along for the ride, jetting from $18 to $26 in a little over a year. We believe we’ll see a recovery in FPX on the Visa IPO, which could fetch more than $18 billion. (Read on below…)

And we believe Visa and the ETF will do quite well. Unlike industry Capital Ones and Discover Cards, 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… it doesn’t have to worry about cardholder debt.

That concern lies with the banks that issue the cards. That means that Visa won’t have much exposure to the spiraling credit crisis, unlike others like Capital One and Discover that are watching share values plummet. They’re the ones that have to be concerned that as of November 2007, credit card debt “soared at an 11.3 percent annual rate in November following an 8.5 percent rate of increase in October” and is still on the rise.

In a market virtually frozen by credit and bank woes, and tumultuous economic uncertainty, Visa could put an end to pent-up salivating investor demand for any company not suffering from credit issues.

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Posted by Ian Cooper · Filed Under US Stocks and Markets 

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