Visa (V) Predictability Rank

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What is Visa Predictability Rank?

Warren Buffett said many times that the companies he likes are:

1. Simple businesses that he understands
2. that have predictable and proven earnings and
3. with economic moat
4. those can be bought at a reasonable price.

It is hard to quantify "simple businesses that he (Buffett) understands", so we will focus on the other three characteristics instead. In GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank, we will show that the businesses that have predictable and proven earnings are usually also simple businesses that an average person could understand.

GuruFocus conducted a back test study of Warren Buffett's strategy of "buying good companies at fair prices" for the years from 1998-2008.

Visa Predictability Rank Calculation

In our database there are 2403 stocks that have been traded from Jan. 2, 1998 to Aug. 31, 2008. We have the complete 10-year financial data and trading prices of these companies for this period. We rank the predictability of these companies based on the consistency of their revenue per share and EBITDA (earning before interest, tax, depreciation and amortization) per share over the past ten fiscal years, and study the correlation between the stock performances and the predictability of the business.

Our study may be subject to these biases and assumptions:

Dividend yields are not counted for investment returns
Effects of price changes due to spin-offs may not be fully adjusted
Study is subjected to survivorship bias due to de-listing, bankruptcy, LBO, M&A, etc.

The correlation between business predictability and investment returns of a company is showed below.

Correlation Between Business Predictability and Investment Returns

	Predictables	Non-Predictable	All stocks
Total Number of stocks	570	1833	2403
Total Lost Money	61	830	891
Total Lost More Than 50%	18	412	430
Total Lost More Than 90%	4	86	90
Average Gain	260.6%	100.0%	138.1%
Median Gain	150.0%	13.0%	39.0%
Maximum Gain	2852.0%	11483.0%	11483.0%
Maximum Loss	-100.0%	-100.0%	-100.0%
Annualized Average Gain	12.7%	6.7%	8.4%
Annualized Median Gain	8.9%	1.1%	3.1%

For the 570 predictable companies, we have seen strong correlation between the predictability of businesses and the stock performances over the past 10 years, regardless of the valuation of business at 1998. Accordingly, we have ranked the business predictability from 5-star to 1-star, as shown in this table.

Predictability Rank	5-Star	4.5-Star	4-Star	3.5-Star	3-Star	2.5-Star	2-Star	1-Star (non-predictable)	Average among all
% Out of All 2403 Stocks	3.3%	2.9%	3.7%	3.3%	3.3%	3.7%	3.3%	76.3%	100%
% that are in Loss (10y)	3%	10%	8%	9%	11%	18%	16%	45%	37%
Average Gain (10y)	364.6%	330.9%	278.0%	235.1%	243.5%	227.8%	154.8%	100.0%	138.1%
Median Gain (10y)	238.5%	193.5%	171.0%	159.0%	132.5%	113.5%	87.0%	13.0%	39.0%
Maximum Gainer	2228.0%	2547.0%	2452.0%	2852.0%	2432.0%	1892.0%	1807.0%	11483.0%	11483.0%
Maximum Loser	-82.0%	-53.0%	-67.0%	-100.0%	-83.0%	-100.0%	-78.0%	-100.0%	-100.0%
Annualized Average Gain	15.4%	14.6%	13.2%	12.0%	12.2%	11.7%	9.1%	6.7%	8.4%
Annualized Median Gain	12.1%	10.6%	9.8%	9.3%	8.2%	7.3%	6.0%	1.1%	3.1%

For detailed information about each predictability rank, please go to GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank

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Visa Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Credit Services » Visa Inc (NYSE:V) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

VISA:Poland V:Peru V:Mexico 1V:Italy 3V64d:UK 0QZ0:UK 3V6:Germany 3V64:Germany 3V64:Germany 3V64:Germany 3V64:Germany V:Chile VISA:Canada VISA34:Brazil VISA:Austria V:Argentina

Address

P.O. Box 8999, San Francisco, CA, USA, 94128-8999

Website

https://www.usa.visa.com

Visa is the largest payment processor in the world. In fiscal 2023, it processed almost $15 trillion in total volume. Visa operates in over 200 countries and processes transactions in over 160 currencies. Its systems are capable of processing over 65,000 transactions per second.

Executives

Paul D Fabara	officer: CHIEF RISK OFFICER	200 VESEY STREET, NEW YORK NY 10285
Julie B Rottenberg	officer: GENERAL COUNSEL	C/O VISA INC, POB 8999, SAN FRANCISCO CA 94128
Ryan Mcinerney	officer: PRESIDENT	C/O VISA INC., PO BOX 8999, SAN FRANCISCO CA 94128
Peter M Andreski	officer: GBL CORP CONTROLLER, CAO	C/O VISA INC., POB 8999, SAN FRANCISCO CA 94128
Tullier Kelly Mahon	officer: V.CHAIR, CHF PPL & ADM OFF	C/O VISA INC., PO BOX 8999, SAN FRANCISCO CA 94128
Rajat Taneja	officer: PRESIDENT, TECHNOLOGY	C/O ELECTRONIC ARTS INC., 209 REDWOOD SHORES PARKWAY, LEGAL DEPT., REDWOOD CITY CA 94065
Lloyd Carney	director	C/O MICROMUSE INC, 139 TOWNSEND ST, SAN FRANCISCO CA 94107
Kelly Alfred F Jr	director, officer: CHAIRMAN & CEO	AMERICAN EXPRESS COMPANY, 200 VESEY STREET, NEW YORK NY 10285
Chris Suh	officer: CHIEF FINANCIAL OFFICER	C/O CARDLYTICS, INC., 675 PONCE DE LEON AVE. NE, STE 6000, ATLANTA GA 30308
Vasant M Prabhu	officer: VICE CHAIR, CFO	C/O SAFEWAY INC, 5918 STONERIDGE MALL ROAD, PLEASANTON CA 94588
Pam Murphy	director	1201 S. 2ND STREET, MILWAUKEE WI 53204
Kermit R Crawford	director	200 WILMOT ROAD, DEERFIELD IL 60015
Teri List	director	2200 PENNSYLVANIA AVENUE, SUITE 800W, WASHINGTON DC 20037
Robert W Matschullat	director	C/O THE CLOROX COMPANY, 1221 BROADWAY, OAKLAND CA 94612
James H Hoffmeister	officer: GBL CORP CONTROLLER, CAO	C/O VISA INC., PO BOX 8999, SAN FRANCISCO CA 94128