In Tuesday's IBD Screen of the Day, the focus is on top stocks that mutual funds are increasing their stakes in. Let's focus on Visa, which pops up on our screen of 41 high-ranking stocks as the third-ranked stock, behind pharmaceutical giants Eli Lilly and Merck.
Visa stock has not yet formed a base but it has gained since hitting a 52-week low of 174.60 on Oct. 13, according to MarketSmith. It crossed its 50-day moving average and more recently its 200-day line too. It appears to be forming a cup base with a buy point of 217.71.
The outlook for Visa and other credit card and payment processors is somewhat dependent on retail sales rising over the holidays. Market dynamics such as sector rotations and rising interest rates have pressured fintech stocks, raising questions over which payment stocks are best positioned to withstand a business downturn.
U.S. holiday sales are expected to grow 4.5% in 2022, above the pre-pandemic average of 3.9% and well below the lofty rates seen in the most recent years, forecasts S&P Global Intelligence. Online holiday sales will grow 7.9%, below the pre-pandemic average of 11.1%, says the market research firm.
Visa Stock Institutional Ownership Is Increasing
Visa reported full-year fiscal earnings for 2022 of $7.50 per share on Oct. 25, beating estimates for both earnings and sales numbers and beating the prior year's Q4 by 19%. For the current quarter, FactSet analysts expect Visa to earn $2.01 a share on sales of $7.70 billion. For the year, analysts expect earnings of $8.30 on sales of $31.95 billion in 2023.
Visa is ranked No. 5 in IBD's industry group ranking of credit card and payment processors, behind No. 1 Cass Information Systems and No. 2 Mastercard, according to IBD Stock Checkup.
Visa sticks out not only because of its strong 83 RS Rating but also because of its institutional ownership. It rates a B- on IBD's Accumulation/Distribution Rating, which measures the relative degree of institutional buying and selling over the past 13 weeks. The B- rating means that there have been more buyers than sellers.
Visa is 53% owned by institutions, with 5,958 investment funds owning the stock as of Sept. 30, up from 5,573 a year ago.
As IBD founder William J. O'Neil wrote in his bestseller, "How To Make Money In Stocks," "It takes big demand to push up prices, and by far the biggest source of demand for stocks is institutional investors."
Another way to gain some upside exposure on Visa stock is by using options via a bullish calendar spread. A calendar spread is a trade that involves selling a short-term option and buying a longer-term option with the same strike price.
Finding Top Stocks
With thousands of names to choose from, how can you efficiently find the top stocks to buy and watch?
For starters, zero in on top growth stocks that fit your criteria with IBD Stock Screener.
And investors can build their own screens from scratch, or start with IBD stock lists, especially the IBD 50, Sector Leaders, Big Cap 20 and IPO Leaders.
From earnings and sales growth to IPO date, dividend yield, current quarter EPS estimates and more, the screener is a valuable tool.
Follow Michael Molinski on Twitter @IMmolinski
