The S&P 500 fell to a 2011 low of 1,075 on October 4^th, erasing twelve months of previous gains. After an encouraging, but inconsistent, return to growth in 2011, the economy appeared to be halting again. In the Investment Comments section of the November 2011 Investor Advisory Service, we pointed out that most economic indicators seemed still to be pointing to growth. While the economy remained slow, it also seemed pointed in generally the right direction. We closed with some optimistic words for stock investors:

“The stock market’s decline in August and September seemed to be pointing at something worse, but the market is notorious for predicting recessions that never materialize…The recent weakness in stock prices looks like a good buying opportunity.”

Indeed, one year later the index had advanced about 35% from last years’ lows and about 30% since our bullish call.

Two of the three companies we profiled in that issue have rallied more than 50%. The third company has lagged the S&P 500 but is still up a double-digit percentage. Let’s take a closer look at one of the big winners, Visa.

Visa (Ticker: V) is a household brand and one of the largest companies we follow in the IAS. We introduced Visa in November 2010 at a price of $74. At the time, a cloud of regulatory uncertainty overshadowed what we believed was a great business model. Because of fixed costs, it is very difficult for a start-up payments company to compete against the incumbents in this space. The same fixed cost hurdle that creates problems for entrants also means that incremental revenue is highly profitable for Visa. As the largest player in payments, Visa’s margins are pretty much maxed out. However, the company continues to grow earnings faster than revenue thanks to share buybacks.

The regulatory outcomes turned out to be less severe than many analysts had worried, and the shares produced a nice, speedy gain. We don’t like to profile the same companies more than once within a 12-month period, but after that period was over we profiled the company again in November 2011. Trading up 23% at $91.19, the valuation was a little higher, but the overall investment case remained intact.

We like to look back at the company’s quarter-by-quarter financial performance in the year after we profile a company. Visa came out of the gate just a tad slow. The first quarter following our write-up was also the beginning of the company’s Fiscal 2012, and coincided with the implementation of the aforementioned regulatory changes. While Visa ended Fiscal 2011 strong, its growth was temporarily reduced going into 2012, and investors temporarily seemed to lose interest. Visa only matched the market’s performance through January 2012.

Shares took off again in February when the company reported a “beat and raise” quarter, beating analysts’ financial expectations and simultaneously raising company guidance for Fiscal 2012. This became a pattern. We went on to call the March quarter “amazing,” with EPS growth of 30%. The stock paused along with the rest of the market in the spring of 2012 but started climbing again at the beginning of June. The quarter ended June 29^th remained on pace, with double-digit organic revenue growth and 25% growth in EPS.

At a recent price of $140, Visa stock is up 54% in the last year, 89% since our original profile. At a price/earnings ratio of about 20, shares are no longer cheap by most standard definitions, but we can certainly see why investors are happy to pay for Visa’s combination of cash flow, growth, and brand quality. Further P/E expansion is certainly possible, although with the stock up so much in the last 24 months, the easiest money has probably been made.

Disclaimer: This company was selected for review in part because of its performance over the past year. Any outperformance relative to the broader market is not necessarily indicative of performance of the broader Investor Advisory Service.