In Focus: Visa, the Next Big Runner
“Someone's sitting in the shade today because someone planted a tree a long time ago.” - Warren Buffett
The theme of the Buffett quote really played out during the pandemic, as companies who were preparing for an all digital world succeeded while many others struggled. Companies who created infrastructures to withstand almost anything when times were sunny, succeeded when times were dark.
As it relates to cryptocurrencies, we're seeing the Buffett quote play out again. Companies who planted trees back in 2018 after the major Bitcoin pull back are sitting under the shade today as Bitcoin reaches new highs.
Visa (V), a company people typically associate with traditional banking and traditional banking rules has spent the last several years exploring the non-traditional side of finance.
Visa has slow played the game of cryptocurrency, and 2021 will likely be the year that they reveal their hand.
Visa has quietly spent the last several years investing in blockchain companies and technologies that they hope will help large financial institutions work with cryptocurrencies whenever those institutions are ready.
In 2019 Visa invested in Anchorage, which secures crypto holdings for institutional investors. In 2015 Visa invested in Chain, which uses blockchain technology to help financial institutions offer better services. Chain was purchased by Lightyear 3 years later, the joint company now goes by Interstellar. Visa's blockchain payment platform B2B Connect was started with Chain, but later moved to IBM after Chain's acquisition.
Visa also teamed up with Coinbase to issue a crypto based debit card that links to a Coinbase user's account. Last year Visa filed a patent to create a centralized digital currency using blockchain, and recently Visa rolled out a pilot program that will allow banks to offer Bitcoin services.
For anyone who hasn't followed Visa thoroughly these small steps into crypto may seem surprising, especially given that the company's CEO once said Visa will not process Bitcoin transactions because he did not consider it a payment system.
Go Fast and Break Things
Investors have really come to like the "Go fast and break things" attitude of tech. The ability for tech companies to get an idea, go all in, celebrate if it works, or move on quickly if it doesn't has been thrilling for investors to participate in. Today, the thought of a company going slow, not breaking things, and making sure they get it right isn't what gets clicks or moves stock prices, but that is what Visa is doing.
I believe this will be the year that it all comes together for Visa. 2021 will be the year that Visa puts its blockchain, Bitcoin, and cryptocurrency puzzle together in a way that works for financial institutions and cryptocurrency adopters.
2021 is the year that Visa's stock price does what PayPal's (PYPL) stock did in 2020. PayPal's exploration and investments in 2017, 2018, and 2019 into areas like peer-to-peer transfers, the unbanked population, and cryptocurrencies resulted in the stock increasing more than 100% in 2020.
Currently Visa trades at $204.73 per share and boasts a market cap of $451 billion. A 100% rise in the stock price will bring Visa's market cap right outside of a trillion dollars. Also, a Visa investment comes with a dividend of ~$1.28 per year. The dividend has increased from $0.12 per quarter back in 2015 to $0.32 per quarter today.
Visa has spent the last several years planting trees in the digital currency and blockchain space, hopefully in 2021 those trees will produce shade and lots of investment profits.