During the quarter, Visa (V) reported strong year-‐over-‐year growth with earnings up 14%, as the business continues to operate at a superior level – very much in-‐line with the past several years. Visa has been a core holding for our clients since October 2008 and rarely has a year gone by without the Company and its partners having to contend with lawsuits and legislation aimed at limiting pricing power and 4 distribution. 2014 is no exception, though most of the news has been favorable, with a ruling for "no change" to Visa's exclusivity for high-‐value signature transactions. We continue to see Visa's pricing power as being derived from VisaNet's superior value proposition relative to substitutes, particularly paper-‐ based payments, automated clearinghouse (ACH), and more recently, "cryptocurrencies" (e.g. Bitcoin). While these emerging payment platforms, including PayPal and Square, represent very legitimate substitutes to traditional interchange, in our view they are not quite "good enough," as evidenced by merchant acceptance that is largely sequestered to small businesses. While we have been net sellers of Visa over the past 18 months, it has been solely due to valuation – our primary tool for risk management at Wedgewood. We believe Visa will continue to maintain its superior competitive positioning, as competitors find it difficult to achieve the network-‐effect benefits that have compounded the value proposition of VisaNet, particularly as acceptance and issuance of the Visa brand continues to expand.
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