Caution May Lead to a Buying Opportunity for a Leading Company

Earnings season is in full swing. And investors can once again see good companies falter on less-than-perfect quarterly news. For investors looking beyond the quarterly sprint, however, it may open up some reasonable buying opportunities.

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  • That’s true for industry-leading firms. They tend to have higher expectations, and any market disappointment could lead to a buy, even if it’s just a slight discount to where a company would otherwise trade.

    One great company that often trades at a premium is Visa (V). The credit card networks are already an oligopoly, but Visa is the leading company there. The company just beat on its latest earnings report, but shares dipped slightly as payment volume growth slowed.

    Shares typically trade at about 30 times earnings, a premium to the market. On a forward basis, the stock is closer to 25 times earnings – about as good a value as investors can get for Visa most of the time.

    Action to take: Visa looks like a buy at current prices or on any drop lower from here. Shares pay a growing dividend, but the starting yield is low at about 0.75 percent.

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  • For traders, the December $250 calls, last going for about $6.55, took a 20 percent dive following earnings. Traders can likely make that return back and more as shares move back to their long-term uptrend in the coming months.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.