Issue #56: an invisible leader in recession-resistant industries and the dominant player in one of the world’s fastest-growing businesses


Performance Food Group Company is one of the largest suppliers to the restaurant, grocery, and convenience store industries in the United States. It’s a largely invisible company supplying some of the economy’s most recession-resistant industries, showing an impressive growth rate at an attractive valuation.

Visa is a blue-chip fintech company, the dominant player in one of the world’s fastest-growing industries. Growth is strong and both margins and returns on capital are excellent, making the Company a massive cash generating machine. The company is ideally positioned to exploit the global move toward e-commerce and away from cash payments. 


Performance Food Group Company  ($PFGC)


???? Summary:

  • Share price at the time of writing: $
  • Performance Food Group Company distributes and markets food and food-related products in the USA. 
  • $PFGC delivers over 250,000 products from 142 distribution centers to over 300,000 customer locations.
  • Revenue and earnings growth are strong and analyst estimates suggest high upside potential. 

 ???? What they do:

Performance Food Group Company is an intermediary between large food production corporations and retail food outlets. The Company buys products from suppliers and sells them to chain and independent restaurants, hotels and other institutional buyers, vending machine operators, convenience stores, and others.

The Company sells its own “Performance Brands” products alongside nationally branded goods.

$PFGC operates in three business segments.

  • Foodservice. This segment sells meat, poultry, seafood, frozen foods, refrigerated products, dry groceries, kitchen and cleaning supplies to restaurants, hotels, and institutional buyers, including some of the country’s most popular chain restaurants.
  • Vistar primarily distributes vending machine products, including candy, snacks, beverages, and other items. Vistar is a leading supplier to movie theaters and office coffee service operators, airport gift shops, correctional institutions, and many others.
  • The Convenience segment supplies approximately 50,000 convenience stores, drug stores, mass merchants, grocery stores, liquor stores, and other outlets. Products include tobacco products, candy, groceries, breads, other food products, health and beauty products, and more.

In FY 2022 the foodservice segment produced $28.56 billion, roughly 56% of sales. Vistar generated $3.68 billion, or just over 7% of sales, and the Convenience segment added $20.60 billion, or around 40.5%. 

$PFGC has completed three major acquisitions since 2019.

  • In April 2019 $PFGC acquired Eby-Brown Company LLC, a leading U.S. distributor of pre-packaged candy, snacks, specialty beverages and tobacco products in the convenience industry.
  • Rheinhart Food Service LLC was acquired in June 2019. Reinhardt was the second-largest privately held foodservice distributor in the US.
  • In September 2021 $PFGC completed the acquisition of Core-Mark, a major distributor to the retail convenience store industry. 

THe acquisitions left Performance Food Group as one of the largest food service and convenience store supply businesses in the US.

???? What we learned from social media and institutional investment patterns:

$PFGC is essentially invisible on social media, with one mention in the last three months. 

This is not surprising: this is essentially a model example of a stock that flies under the retail investor radar. It’s a backbone company in a basic and unexciting industry, and most investors have never heard of the company or its services, though they probably consume its products on a regular basis.

Stock ownership patterns reflect this trend. Institutional investors own essentially all outstanding shares. reports that institutional ownership is at 100.64%. Note: ownership data can exceed 100% due to delays in reporting of transactions.

The leading institutional shareholders are Vanguard, Wellington Managaement Group, FMR, and Blackrock.

???? Smart Money Signal: Ken Griffin’s Citadel LLC bought 837,000 shares of $PFGC in the last 3 quarters.

???? Why $PFGC could be valuable:

Performance Food Group Copmany serves several growing industries. The food and grocery retail market is expected to grow at a CAGR of 3% through 2030.

The convenience store market, another major sales generator for $PFGC, is expected to show a 5.5% CAGR through 2028.

The US food service industry is expected to show a CAGR of 3.7% through 2027.

While these growth rates are unexceptional compared to what you find in cutting-edge tech business niches, they are enough to support continuing growth, and the Company’s competitive position is strong enough to generate growth by increasing market share.

Revenue growth has surged since 2019, even through the COVID-19 pandemic.

Source: Performance Food Group

$PFGC has targeted net sales of $62 billion to $64 billion and EBITDA of $1.5 to $1.7 billion in 2025. 

Performance Foods Group prides itself on decentralized decision making, allowing local and regional managers to adjust operations to fit the needs of their markets. The Company has an excellent reputation for customer service.

Consumer staples, grocery stores, convenience stores, and chain restaurants are all very basic and highly recession-resistant niches. Performance Food Group is one of the nation’s leading suppliers to all of these sectors.

With a forward P/E of 14.95, a PEG ratio of 0.27, and a Price/Sales ratio of only 0.14, there’s an attractive value argument, especially given the strong recent growth rate and achievable targets.

10 analysts currently cover $PFGC. Two rate it “Strong Buy”, four say “Buy”, and four say “Hold”. The consensus price target is $65.14, 34% above the current level.

⚠️ What the risks are:

1️⃣ $PFGC carries significant amounts of debt. Recent acquisitions have dramatically increased the Company’s revenues but have also left it with a potentially problematic debt load. If there’s a significant downturn in business the debt could become an issue.

2️⃣ There’s no moat. Performance Food Group customers can switch to a competing service very easily and with no meaningful expense. The Company will have to remain highly competitive and attuned to customer needs to maintain market share, and margins are likely to remain low due to a highly competitive pricing environment.

3️⃣ Performance Food Group may be unable to successfully integrate acquisitions. Three major acquisitions, all mde in the last three years, are currently delivering a large percentage of the Company’s total sales. Success and growth potential will depend largely on management’s ability to fully integrate these and potentially further acquisitions.

Bottom line: $PFGC is a highly resilient business serving basic needs exclusively in the US. It is well insulated against adverse economic conditions and geopolitical issues.  It’s a fundamentally defensive position that still displays a very credible growth rate and attractive valuation metrics..

Visa Inc ($V)


???? Summary:

  • Share price at the time of writing: $
  • Visa Inc is a global payments technology company. It facilitates digital payments among consumers, merchants, financial institutions, government entities, and others.  
  • Visa operates VisaNet, a global transaction processing network.
  • $V is not a bank and does not issue credit cards. It takes on no credit risk.
  • Shares have dropped almost 15% from their November 2021 peak, despite consistent increases in revenue and earnings.

???? What they do:

Visa is a global leader in digital payments, facilitating secure, reliable, and convenient transactions. The Company handles transactions between and among financial institutions, merchants, consumers, digital banks, fintech companies, and government and non-government organizations. Visa operates in over 200 countries and territories.

Visa’s 15,100 financial institution clients use the Company’s services to offer credit, debit, and cash access products for business, individual, and government clients.

The Company’s network facilitates consumer-to-business, person-to-person, business-to-consumer, business-to-business, and government-to-consumer transactions, embracing the entirety of the payments processing landscape.

Visa’s revenues come from facilitating money movement: service revenues, data processing revenues, international transaction revenues, and others. Payment Services is the Company’s only reportable segment. 

This is a breakdown of Visa’s 2021 revenue generation:

Visa is not a financial institution. It does not lend money or incur credit risk. It does not issue cards or set rates or fees. The Company is essentially one of the earliest pioneers in the pure fintech niche.

???? What we learned from social media and institutional investment patterns:

Visa maintains a continuous but rarely exceptional level of social media attention, spiking with earnings announcements or news releases. It’s not viral, but it’s not ignored either.

Visa is a highly visible company and a household name, mainly because of the familiarity of Visa-branded credit and debit products. It’s natural that the company would get some level of attention. It’s also a poorly understood business: many people assume that it is also a credit card issuer, like Mastercard and Discover. 

Visa is an established blue-chip firm in the fintech niche, an industry where the buzz tends to be focused on much newer companies. That means it will get attention, but it won’t generate the kind of excitement that a new player with a fraction of the business might. 

Visa may not be exciting enough for r/wallstreetbets, but institutional investors see it differently. 97.59% of Visa’s outstanding shares are held by institutions, with Vanguard and Blackrock holding the largest stakes.

Notable comments from Reddit:

“It may be crappy of me but I prefer to invest in innovative industries through stable, tried and true companies that are reaching in innovative directions. I would rather own F than TSLA, I would rather own V or MC than COIN or PYPL. The cutting edge companies are great and newer, innovative companies are probably a great bet. But they all seem overvalued, and don't necessarily have the track record of a GM or Visa or whatever. “

– deepfield67

“The biggest problem with Visa is that its a “boring” company. So many people here want the next big thing, the next Amazon.

Meanwhile I got in Visa at 197.50 and I'm feeling great about it. I'm here to make money and boring old Visa makes money.”

– Bsdave103

???? Smart Money Signal ???? Polen Capital has purchased over 5.4 million $V shares in eight separate transactions since Q1 2020, with only a single sale of 515,000 shares.

???? Why $V could be valuable:

The global payment processing market is expected to show an exceptional CAGR of 22.7% through 2030. 

Visa stands to benefit from long-term secular global rends like the move away from cash payments and the rapid growth of e-commerce. 

Visa is the world’s largest payments network by payment volume, total volume, and number of transactions. In 2020 Visa held a 54% share of the credit card network purchase volume.

The Company is highly focused: it handles payment processing, nothing else. It processes many different types of payments, but in every case the fundamental business remains the same, avoiding distraction and keeping management’s attention on the core business. 

Visa’s business is asset-light and requires minimal CAPEX. This generally low-expense model generates impressive operating margins (67.48%) and return on equity (39.85%). Free cash flow took a pandemic hit but has bounced back strongly. 

Source: Macrotrends

Free cash flow for the first three quarters of 2022 is already $12.3 billion, and is on track to show strong year-over-year growth from the record level in 2021.

The earnings and revenue history is extremely strong, showing a steady growth trend. Visa dropped all of its Russian business in Q2 2022 with no apparent impact on results.

Source: WallStreetZen

Cross-border transactions, an important high-margin revenue source, have bounced back strongly from a pandemic-driven slump, with total cross-border volume up 45% in July 2022 and 36% in August, 134% of pre-pandemic (2019) levels.

From a valuation perspective, $V is neither a screaminhg buy nor notably overvalued. The forward P/E of 22.83, PEG ratio of 1.3, and price/sales ratio of 14.81 appear to be a relatively fair current valuation, leaving growth and potential market recovery as the primary expected drivers of appreciation.

Visa’s 0.78% dividend yield doesn’t make it a dividend investor’s dream, but it’s a bonus. The dividend has grown substantially since it was introduced in 2009, and the exceptional cash flow and a payout ratio of only 21.3%, there’s plenty of room to increase it.

Visa is an analyst favorite. 39 analysts currently cover Visa. 13 rate it a “Strong Buy”, 22 say “Buy”, and four say “Hold”. The average analyst price target is $260.67, 35% above its current price.

⚠️ What the risks are:

1️⃣  Regulation. Visa operates in highly regulated markets. Some governments have taken steps to favor domestic payment processing platforms and the recently introduced Credit Card Competition Act could target some of Visa’s competitive advantages in the US. Unfavorable changes in the regulatory environment could affect results.

2️⃣  Competition in the payment processing business is intense, and new fintech companies emerge on a regular basis, most of them targeting a portion of Visa’s business. Visa will have to maintain its competitive edge and innovate constantly to avoid losing market share.

3️⃣  Macroeconomic conditions could have a significant impact on results. While $V has held up strongly in the current slowdown, a serious recession could significantly depress transaction volumes and have a negative impact on revenues.  

Bottom line: Visa is the dominant player in one of the world’s fastest-growing industries. Growth rates are solid and have held up despite an economic slowdown. Margins and returns on capital are exceptional, making Visa a consummate cash generator. Valuation is fair and future prospects are excellent. 

That's a wrap!

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