Why Visa Should Thrive

Names like American Express (AXP) and Discover Financial (DFS) will be hurt with these delinquencies as they will be forced to write-down their portfolios. The pure-play card servicers aren’t completely recessionary proof, but history has shown that they perform well during these times, and extremely well during recovery periods. Visa Inc. (V) and MasterCard Inc. (MA)  will continue to outperform their peers and are safe plays for any portfolio.

The Industry

Card Servicers are generally mis-understood by many investors. They operate as pure network use plays. They hold no credit exposure on their books, which is why they have performed so well in this market. They are paid per swipe and by purchase volume. Secular shifts in purchases also provide these companies with solid revenue streams.