Sectors tend to start out with an explosion of activity, then consolidate into a few big names over time. That’s played out in everything from automakers to the media. As this happens, surviving companies tend to settle into making steady profits.
And when there are just a handful of players, one will typically stand out as the industry leader. This company will fare slightly better than its peers for various reasons.
One consolidated sector worth buying for the long term is the credit card space. It’s a key part of financial transactions and economic activity. And there are only a handful of big players.
The largest? Visa (V). The industry leader has held up well in the past year, down just 3 percent. But it’s down 20 percent from its 2021 highs overall. With consumer spending holding up overall, that’s made the company a relative value.
Action to take: Shares are worth picking up in the low $200 range. And the company yields 0.8 percent right now. While not huge, it’s likely to grow in time due to the low payout ratio of 21 percent of earnings.
For traders, the March 2023 $230 calls, last going for about $5.65, offer mid-double-digit returns if shares bounce further off their recent lows.
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.