What Stocks to Buy Today

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One of the most important qualities a company can have is a competitive advantage so strong that it can dominate its market for years. A term that is often used to describe this type of advantage is a moat, referring to how the company is well-insulated from competitors.

Two stocks that have that type of advantage are S&P Global (NYSE:SPGI) and Visa (NYSE:V). Here’s why these two strong stocks are worth considering.

S&P Global

S&P Global is widely known as the company that runs the S&P 500 and other stock market indexes, but that is only a small part of its business. S&P’s most dominant business is its credit ratings arm. S&P is the leader in this space, along with Moody’s (NYSE:MCO), each of which have about a 40% market share.

There is only one other major player, Fitch Ratings, and it holds about a 15% market share. This business is protected by a competitive moat because there is really no opportunity for new companies to enter it as these brands are so strong, and more players would water down the ratings. Additionally, a significant number of regulatory hurdles limits competition.

If this were S&P’s only business, it would be a good one, but it is also a dominant player in two other markets, one of them being its index business. It is one of just a handful of competitors in that area, along with Nasdaq (NASDAQ:NDAQ), MSCI (NASDAQ:MSCI) and a few others.

S&P’s largest revenue generator is its Market Intelligence business, which accounted for $1.1 billion of the firm’s $3.1 billion in total revenue for the second quarter. This business provides data and analytics to institutional investors across sectors and was bolstered last year by the acquisition of IHS Markit. It also provides research and intelligence on commodities and for the automobile industry.

These various businesses provide the company with incredible balance, designed so that some perform better than others in different market environments. Additionally, since most of its revenue is from subscriptions and fees, it has a steady, repeatable cash flow that generates high operating margins for company. This is why S&P Global has posted an average annualized return of 17.9% over the past 10 years as of Oct. 17 — and why it remains an excellent stock.


Visa is also a dominant force in its industry as the leading payment processor and one of only two major players along with Mastercard (NYSE:MA). While there are two other credit processors — American Express (NYSE:AXP) and Discover Financial (NYSE:DFS) — they are considerably smaller, but they also have different business models. Both of the latter companies have closed-loop networks, meaning they are both lenders and processors.

Visa simply provides the network, and it makes all of its revenue on swipe fees and other fees. That means there is no credit risk associated with being a lender. It also means that Visa has a very simple business model without a lot of relative overhead that comes with having physical branches or products. This also leads to high margins, as Visa has a ridiculously high 67% operating margin. This gives the company lots of cash flow and money to invest in its future growth.

Visa obviously does better when consumer and business spending is high, but it has been very resilient over the years because of its dominance and has outperformed in both good and bad markets. Over the past 10 years, Visa has posted an average annualized return of 16.9%, just slightly below S&P Global, but far better than the benchmark S&P 500, which is at 9.5% over that same stretch.

Visa’s stock price is up 14.3% this year and it is trading at a reasonable valuation for a growth stock, with a forward price-to-earnings ratio of 24.

S&P Global and Visa have the type of sturdy advantages that should allow them to beat the market for a long time.

Disclaimer: All investments involve risk. In no way should this article be taken as investment advice or constitute responsibility for investment gains or losses. The information in this report should not be relied upon for investment decisions. All investors must conduct their own due diligence and consult their own investment advisors in making trading decisions.