Visa Inc. (V - Free Report) posted favorable earnings results in the fiscal fourth quarter. The payments technology company involved in financial services sector posted earnings beat for the quarter, as the company continues to enjoy growth in payments volume, cross-border volume and processed transactions and a lower tax rate.
Visa’s encouraging earnings results had a positive impact on the financial sector and boosted investors’ sentiment. Following the promising development, investing in financial mutual funds with a significant holding in the San Francisco-based company will be prudent.
Q4 Earnings in Focus
Visa reported fourth-quarter fiscal 2018 (ended Sep 30, 2018) earnings of $1.21 per share, beating the Zacks Consensus Estimate by 0.83%. Also, the bottom line improved 34% year over year.
Net operating revenues of $5.43 billion came in line with the Zacks Consensus Estimate but were up 12% year over year. This upside was primarily driven by an increase in all the components of net revenues such as service, data processing, international transaction revenues and other.
Visa remains well positioned for further growth on the back of its solid market position, increase in payment volumes, accretive acquisitions and significant opportunities from its secular shift toward electronic payments.(Read More: Visa Q4 Earnings Beat on Increase in Payment Volumes)
Visa’s Earnings Beat: Boon for Technology Sector
Financial sector is the best performer in the past five days. The financial sector has jumped 4.1% during the period, becoming a key sector on the S&P 500. In fact, the financial sector’s performance is better than the S&P 500’s increase of 2.1%.
This earnings season, along with Visa’s earnings, the financial sector is already benefited from strong earnings results by some of the biggest players of the sector, JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) , Bank of America (BAC - Free Report) and Morgan Stanley (MS - Free Report) . Additionally, a high rate environment is also boosting the sector.
In fact, mutual funds related to this sector registered strong returns in some of the key sector equity fund categories. According to Morningstar, financial mutual funds have returned 8.9% in the last three years.
Buy 3 Financial Mutual Funds
Here we have selected three financial mutual funds that have significant exposure to Visa. Moreover, these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
These funds also have encouraging one-year returns and minimum initial investment within $5000. Also, each of these funds has a low expense ratio.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
Fidelity Select Consumer Finance Portfolio (FSVLX - Free Report) seeks appreciation of capital. FSVLX invests a large chunk of its assets in securities of companies involved in offering services related to consumer finance. The fund considers financial strength and economic conditions before investing in a company.
FSVLX carries an expense ratio of 0.89% compared with the category average of 1.41%. Moreover, FSVLX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 14.7%.
FSVLX has a Zacks Mutual Fund Rank #1. Shilpa Mehra is one of the fund managers of FSVLX since 2012. Further, as of the last filing, FSVLX held 6.11% of its assets invested in Visa.
T. Rowe Price Financial Services (PRISX - Free Report) seeks both capital growth and current income. The majority of its assets are invested in financial services sector companies. It may also purchase securities of companies involved in providing financial software. The fund uses fundamental bottom-up analysis to select securities.
PRISX carries an expense ratio of 0.85% compared with the category average of 1.41%. Moreover, PRISX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 8.7%.
PRISX has a Zacks Mutual Fund Rank #2. Gabriel Solomon is the fund manager of PRISX since 2014. Further, as of the last filing, PRISX held 1.83% of its assets invested in Visa.
Fidelity Advisor Financial Services M (FAFSX - Free Report) seeks appreciation of capital. FAFSX invests mainly in common stocks. The fund invests a huge part of its assets in securities of companies that are involved mainly in offering financial services. FAFSX invests in both U.S. and non-U.S. companies.
FAFSX carries an expense ratio of 1.37% compared with the category average of 1.41%. Moreover, FAFSX requires a minimal initial investment of $0. The fund has one-year annualized returns of 6%.
FAFSX has a Zacks Mutual Fund Rank #2. Christopher T. Lee is the fund manager of FAFSX since 2013. Further, as of the last filing, FAFSX held 1.12% of its assets invested in Visa.
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