A gain if 11.54% in 2018 for shares of Visa Inc. (V) points to a narrative of healthy institutional support accompanying the climb. Visa’s stock has been a very strong performer over the years, and 2018 looks to be a continuation of that trend. With digital payments growing year after year, Visa is in position to capture much of that growth. Not only that, one of the biggest factors used to identify strong stocks for the long term is to look simply at supply and demand – and Visa stock has no doubt been in demand. Visa shares recently triggered a potential institutional buy signal on April 26, 2018. Betting on growing stocks with great fundamentals and increasing institutional activity can be worthwhile for long-term shareholders.
In the perspective of Macro Analytics for Professionals (MAP), the strongest indicator of positive price momentum is obtained by measuring potential institutional accumulation. In 2018, Visa has logged five of these rare signals. We want to see bullish activity in the stock’s shares alongside solid fundamentals. This indicates that demand for the stock should increase. (See also: Visa’s Breakout May Boost Stock by 10%.)
In the chart below, Visa broke out above its late January high, accompanied by increasing accumulation. There is no resistance above the level of approximately $127, and the stock has room to run to the upside:
Courtesy of TradingView
MAP’s process focuses on identifying companies with healthy fundamentals accompanied by outsized, unusual institutional activity to try and measure potential accumulation/distribution at the single-stock level. By studying these data points, we can hypothesize which equities institutions are trafficking in and marry this information with fundamentally sound companies. We want the odds on our side when looking for the highest-quality stocks.
When deciding on the strongest candidate for long-term growth, we consider many technical areas important to success. A few of those for Visa are as follows:
- Year-to-date (YTD) outperformance vs. market: +12.56% vs. SPDR S&P 500 ETF (SPY)
- YTD outperformance vs. sector: +8.84% vs. Technology Select SPDR Fund (XLK)
- Recent bullish institutional activity on April 26, 2018
On top of a great technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Visa has solid earnings and sales growth rates:
- One-year sales growth rate: +21.72%
- One-year EPS growth rate: +17%
- Three-year EPS growth rate: +8.38%
Visa checks the box on strong technicals and fundamentals while recently showing bullish institutional momentum. We believe that Visa’s recent earnings report on April 25, 2018, supports the fundamental narrative for a potential long-term position. Visa’s stock has been a high-growth performer for years, and with multiple unusual institutional activity signals, it could be setting up for a higher move to the upside. All of this points to further long-term bullish action for the stock. (For more, see: Why MasterCard Shares May Outperform Visa.)
The Bottom Line
Visa represents a potential buying opportunity for the long-term investor. Given the recent breakout to new highs, solid earnings beat and a bullish institutional accumulation signal, this stock could be worth a spot in a growth portfolio.
To learn more about MAP’s institutional signals, please visit our “About Us” page.
Disclosure: The author holds a long position in Visa shares at the time of publication.