2019 Stock Picks: Intuit and Visa

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We can be certain of two things in commerce: transactions and taxes

By Dan Gonzales                                                                                                      March 3, 2019

These companies have almost monopolies in both fields.

Chances are you have a credit or debit card that is affiliated with Visa or you have thought about filing taxes electronically through Turbotax, a service of Intuit. My stock picks for the year are Visa and Intuit. I have selected these two based off of strong growth potential on the top and bottom line this year. Intuit absolutely dominates the fiscal quarter that ends on April 30th also known as their Q3. This is their biggest quarter in terms of revenue for the past two years according to their filings.

Over the past two months, December and January, I have given a lot of attention to researching and modeling Intuit and Visa's financials. I studied five years worth of 10K and 10Q reports finding out as much as I could learn about the way each company conducts their business. From the surface level, I only knew about Visa debit and credit cards. I assumed the company made their money from the issuing of said cards and perhaps from processing transactions. That was somewhat right as Visa has three main sources of revenues: services, data processing, and international transactions. Fortunately, I found Visa CEO, Alfred Kelly, in an interview on CNBC where he discussed the business and particularly how the top and bottom line, as well as EPS, have grown.

For more info on Visa read my analysis and perspective on the company here.

I'll be directing most of my focus on Intuit for the rest of the article now.

What also impressed me was their marketing strategies. Both companies advertise heavily during sporting events that have been a common part of NBA and NFL commercials. This is a good tactic because of the large audiences live content brings; sporting events are truly live and ultimately engaging spectacles. 

 

We are very Into It! The case for $INTU

In Intuit’s “A Giant Story," entrepreneur Pari is inspired to create a giant invention that gives the power of big business to everyone. Harnessing the power of TurboTax, QuickBooks, and Mint, Intuit Giants work on their customers’ behalf, enabling them to spend less time worrying about their finances and more time doing the things they love.

I suspect that Intuit has a very talented marketing team. While they've increased their advertising expenses by x% YOY. I believe that has been an essential element that gobbles up more and more tax filers each year. Even though they compete with H&R Block and CPA's; I have witnessed them launch an innovative product that allows the consumer to work with a live CPA called TurboTax live. Check their advertisement down below.  


Pretty innovative right? Not to mention that Ellen is one of the top influencers for their target demographic, middle-class people that loathe the arduous process of tax work, preparing documents, and the sensitive discussion around wealth. What I really like about Intuit is the value it provides small businesses through its products: Quickbooks, TurboTax, and Mint. To add to investor confidence, I have gotten word that Intuit is taking away market share from traditional CPA's. Which is bad if you work in accounting but great for the consumer. I truly believe that Intuit is the more innovative company. I know Warren Buffet invested in H&R Block back in the day and I would say that Intuit is the modern equivalent.

Finanically, the company experienced solid top line growth. Sales for their fiscal second quarter came in at 1.5B compared to 1.3B from last year.