Ackman Bets Big on Visa Amid Lagging Returns

Bill Ackman's investment firm, Pershing Square USA, has added six new holdings to its portfolio, including Visa (NYSE:V), Mastercard (NYSE:MA), Alcon (NYSE:ALC), Intercontinental Exchange (NYSE:ICE), and S&P Global (NYSE:SPGI). This is the biggest portfolio overhaul for Ackman in years. One of the key holdings is Visa, a company that operates on a toll booth business model, collecting fees from transactions without carrying credit risk.

The scale of Visa's operations is impressive, with 71.7 billion transactions processed in the June quarter, up 10% year over year. Revenue reached $11.63 billion, a 14.4% jump, and non-GAAP EPS came in at $3.32. Operating margins were near 59%. However, Visa has lagged the S&P 500 over the past five years, with a 5-year return of 60.91%, compared to the S&P's 75.93%.

Ackman is betting on continued cross-border spend expansion and Visa's pricing power holding up. The company has also been buying back shares, repurchasing about 14.5 million shares at an average price of $331 last quarter. With $28.4 billion still authorized for buybacks, this could be a key driver of future growth.