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What Costco's Partnership with Visa Means For Mutual Fund Investors (COST, V, C)
Shauna O'Brien Mar 02, 2015
On Monday morning, Costco announced that it has entered into an agreement with Visa to make the credit its exclusive partner.
Inside the News
Last month, Costco announced that it has ended its 16-year deal with American Express. In the deal, the company exclusively accepted American Express cards in its stores. Shares on AXP plummeted on the news, as its deal with Costco accounted for 8% of its profits.
This morning, the retailer announced that Visa would replace American Express. The company also announced that Citigroup will be the exclusive issuer of its co-brand credit cards.
Opportunity For Visa
The deal that Costco had with American Express accounted for 8% of of profits. It also accounted for 20% of its worldwide loans and 10% of its cards in force. With that in mind, it is not a surprise that shares took a hit when the deal ended.
While this deal is a good opportunity for Visa, investors should take into account that Visa is twice as big as American Express. Therefore, this deal will most likely have a smaller impact on the credit card issuer’s bottom-line revenues.
Mutual Funds to Watch
Investors interested in Visa may be interested in the funds listed below. These funds currently have the largest stakes in the company.
| Symbol | Mutual Fund | Stake |
|---|---|---|
| VTSMX | Vanguard Total Stock Market Index | 1.12% |
| FCNTX | Fidelity® Contrafund® | 0.97% |
| VFINX | Vanguard 500 Index | 0.73% |
The Bottom Line
The funds listed above allow investors to gain exposure to Visa while remaining diversified. Investors interested in Visa may also be interested in Mastercard (MA) and Discover (DFS).
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