Investors love to look at what Berkshire Hathaway owns in its public equities portfolio. Some of the biggest holdings are well-known industry heavyweights, including Apple, Bank of America, and Coca-Cola.

But there's a much smaller position in a business that's perhaps even more dominant than any of those names I just mentioned. Buffett owns $2.3 billion worth of this financial stock, making up less than 1% of Berkshire's entire portfolio.

After reporting another stellar quarter, is this company a no-brainer buy?

Business as usual

The business I'm talking about is Visa (V 1.35%). In the three months that ended March 31 (Q2 2024), it reported revenue of $8.8 billion and diluted earnings per share (EPS) of $2.29, figures that beat Wall Street estimates. The shares jumped 3% right after the announcement.

That top line was up 10% year over year. It was driven by growth in Visa's active card base by 6%. Additionally, payments volume increased 8% compared to Q2 2023. Once again, cross-border volume showed remarkable strength.

What's noteworthy is how solid Visa's results continue to be in the face of what many consider an uncertain macro environment. In theory, higher interest rates, inflationary pressures, and fears about a recession should discourage higher spending. Chris Suh, Visa's chief financial officer, said on the Q2 2024 earnings call that executives are seeing "relatively stable volumes in the U.S. across credit and debit."

We can't talk about Visa without mentioning how profitable it is. In the second quarter, operating income reached $5.4 billion, translating to 61% of revenue. Investors would struggle to find companies that can exceed this metric. It points to how lucrative running a payments network at scale like this can be. The technological infrastructure to process transactions is already built out, resulting in every transaction carrying high margins.

This setup helps explain why Visa generated $7.6 billion of free cash flow through the first six months of fiscal 2024. Capital expenditures only totaled $548 million during this time, as there is only modest spending needed to maintain and expand the business. Consequently, management can return billions of dollars to shareholders each quarter via dividends and buybacks.

Rewarding shareholders

In the past 10 years, Visa shares have trounced the S&P 500. The business has long been a winning investment for shareholders. Unsurprisingly, that's due to strong underlying fundamental performance, regardless of what kind of economic situation we are in.

It shouldn't be a surprise that a company as financially successful and competitively dominant as this one trades at a premium valuation. The stock goes for a price-to-earnings (P/E) ratio of almost 31. That does represent a discount to Visa's trailing-10-year average P/E, but it's way more expensive than the S&P 500's P/E multiple. This could turn off value-focused investors.

According to the average of analyst estimates, Visa's revenue and diluted EPS are projected to rise at compound annual rates of 10.2% and 15.2%, respectively, between fiscal 2023 and fiscal 2026. These gains would be in line with results during the past 10 years.

It's not hard to believe that Visa will hit these targets, particularly when you consider how much it dominates the card industry. Moreover, there is still a huge expansionary runway for cashless transactions to take share from cash- and paper-based forms of payment.

Because this is such a high-quality enterprise with a durable growth tailwind, paying a relative premium to own the shares is an easy argument to make. Visa might be a forever stock that one can buy and hold for a very long time. I believe Buffett feels this way, too.