Visa To Be Included in S&P 500 Index

Visa (NYSE:V) stock got a big lift today after Standard & Poor announced last Friday that the payment processor, along with four other stocks, will join the benchmark after the close of trading December 18th.

I bought the stock at $59.50 a share on March 18, 2008 when it went public, despite that the economy was already in recession at that time. It’s one of the stocks that I do plan to hold for as long as possible. As a payment processing card, not the issuer of the credit card, Visa doesn’t have the problem many banks face when cardholders fail to make payments. And the recession so far has proven not to be an issue for Visa. For 2009 fiscal year that ended last quarter, Visa had a net operating revenue of $6.9 billion, up 10% from 2008, with net income at $2.4 billion, an increase of 24% from last year. The stock has gained nearly 60% so far this year.

The inclusion is the S&P 500 index can boost Visa’s share price even further as mutual funds, especially index mutual funds, that follow the S&P 500 are required to purchase every stock in the index in order to accurately track the benchmark. A MarketWatch report this morning will give you an idea how the inclusion may affect Visa shares:

“We estimate that S&P 500 index funds account for about 11.4% of the float-adjusted capitalization of the S&P 500 Index,” wrote Keefe Bruyette & Woods analyst Melissa Roberts in a research note on Monday.

“Therefore, we estimate that about 51.3 million shares of Visa will need to be bought by S&P 500 index funds,” the analyst said. “Visa’s one-month average daily trading volume is about 4 million shares, implying about 13 days of buying volume.”

Another recent IPO stock, Mead Johnson Nutrition (NYSE:MJN), the maker of Enfamil infant formula, will also the S&P 500 on December 18th.

*Stock chart from MarketClub

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One Response to “Visa To Be Included in S&P 500 Index”

  1. matt |  Dec 26, 2009 at 4:54 pm

    its about time! this is going to be huge for Visa and profits will ensue after the S&P index funds purchase V