Fund manager reveals his top stock picks that rose during the market sell-off

US Top News and Analysis

Shares of Visa hold significant growth potential and could even help investors weather market volatility, according to fund manager Freddy Lait at Latitude Investment Management. Lait, who is also a managing partner at the firm, pointed to Visa’s 0.8% gain on Monday — despite a very risk-off mood in the broader market — as a sign of the stock’s resilience. According to the fund manager, Visa’s 7% share price growth this year suggests that investors have broadly ignored the stock with the focus firmly on large banks. The S & P 500 Banks Group has risen 23% this year on the back of increasing profits from large financial institutions. V 1Y line Lait’s comments come as investors grapple with a potentially overvalued technology sector that appears to have become very volatile. The S & P 500 , dominated by Big Tech stocks, fell by more than 2% on Tuesday to kick off September. The benchmark also fell by 8.5% at the start of August from its previous peak before paring back. Visa and its main competitor, Mastercard , form a global duopoly in the payment processing industry. The company has grown rapidly as an increasing proportion of transactions worldwide moved from cash to debit and credit cards. Now, despite some slowdown in the transition as the sector matures, Lait remains bullish on Visa’s prospects. “Even though the growth is slowing to a degree, and the cash-to-card sort of tailwind is slowing, it is still there. There is still a meaningful amount of cash-to-card progression to be made of that business,” Lait told CNBC’s “Squawk Box Europe” on Wednesday. Visa is among the top 10 holdings in Lait’s Latitude Horizon Fund and Global Fund . Lait projects that Visa can continue to grow its earnings and cash flow by more than 10% annually, even in a conservative scenario. He also highlighted Visa’s “built-in protection” against future inflation, a key concern for many investors in the current economic climate. Visa’s business model relies on taking a small proportion of every transaction it processes as fees. “It has the added benefit that it is intrinsically inflation-linked because whatever you’re spending on the card is obviously directly linked to consumer inflation,” Lait explained. This feature provides a safeguard against potential future bouts of inflation, even if current inflation rates remain moderate. The company has a five-year annual compounded profit growth rate of over 11%. In 2021, 2022 and 2023, a period of above-normal inflation, Visa reported earnings growth of 15%, 22% and 16%, respectively, according to FactSet. “I think if it can carry on delivering that 12, 14, 16% earnings growth for the next five years, it more than justifies the multiple today,” Lait added.