Warren Buffett made quite a name for himself in the investing world, and one thing I appreciate most about him is that he doesn't shy away from offering advice that the average person can soak in and apply. One particular quote I like from Buffett is:
"The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage."
This quote can apply to many companies. The company that it applies to enough to make me excited as an investor in is Visa (V 1.54%).
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Visa is the world's largest payment processor, and that's where its competitive advantage and durability lie. Over 150 million merchants accept Visa, it has over 4.8 billion payment credentials (cards, digital wallets, etc.), and in the 12 months leading up to March 31, it processed around $16.1 trillion in payment transactions.
Visa's durable competitive advantage comes from the network effect it benefits from. Every new cardholder is incentivized to get a Visa card because it's the most widely accepted in the world, and every new merchant is incentivized to accept Visa because it's the most-held card in the world.
This dynamic creates a snowball effect where Visa's business can organically grow without needing to spend heavily on customer acquisition or short-term incentives. And since Visa has held its leadership position for so long, it has built a great brand reputation and trust that make it the go-to for businesses seeking security and reliability in handling their transactions.
