Visa (V, Financial) contributed to performance but less so compared to most holdings. Credit card payment volumes over Visa’s networks continued to recover from COVID effects, growing over +18% on a U.S. dollar basis, supplemented by continued strength in debit. High-margin, travel-related cross-border credit card volumes continue to remain below 2019 levels, and although it is difficult to know when cross-border payment activity will recover to 2019 levels, we think it is just a matter of “when” not “if.” The return of international travel should represent additional upside to Visa’s growth rates over the next few years. As for Visa’s stock, we note again that the index providers, S&P Dow Jones and MSCI, announced the potential re-constitution of their equity indexes, including changing the sector classification of payment processors, such as Visa (and PayPal), from “Information Technology” over to “Financials.” Although we are benchmark agnostic, we suspect that the potential change to this market structure, particularly within passive index exchanged-traded funds, likely added to volatility during the quarter. Visa traded down to attractive relative and historical forward earnings multiples, so we added to our position. Visa maintains a dominant franchise that is providing the network – or “rails” – that have led to a boom in fintech payment volumes, so we were happy for the opportunity to increase our weightings.
From David Rolfe (Trades, Portfolio)'s Wedgewood Partners fourth-quarter 2021 letter.
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