As an investment, companies with few competitors are better than companies with many competitors. That’s because competition tends to keep prices low and innovation high. That’s good for consumers, but not healthy for companies – or their shareholders.
That’s why companies with a handful of competitors tend to be more consistently profitable. That can keep share prices generally rising over time, and with lower volatility. These companies also tend to make for attractive income plays.
When it comes to the oligopoly space, it’s tough to beat out the credit card providers. In that space, the industry leader is Visa (V).
Even with a slowdown in consumer spending, the company managed to see revenues rise 11 percent compared to the first quarter of 2022.
That helped boost shares slightly, which are still near 52-week highs, but under their mid-2021 peak.
Action to take: Visa’s profit margin is just over 50 percent, and with revenues continuing to rise, there’s more cash available for investors via dividends and share buybacks. Right now, the yield is low at just under 0.8 percent, but Visa has been growing it over the past few years.
For traders, shares look likely to take a crack at another all-time high in the coming months. The September $245 calls, last going for about $8.70, offer mid-double-digit returns on such a move higher by the autumn.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.