4 key characteristics of stocks that crush inflation | Personal finance

  4 key characteristics of stocks that crush inflation |  Personal finance

2. Network effects

If you combine this with its growing e-commerce business (which posted 14% revenue growth last quarter), you have a high-quality company that is not only poised to weather the inflation storm, but also achieve new heights.

Highlights

  • The most obvious example of a network effect is the telephone. There was very little value when Alexander Graham Bell invented the first telephone because no one else in the world had one. But as more and more people started using telephones, the value of the network increased exponentially.

  • Network effects are one of the most powerful economic moats. This is a phenomenon where the value of a service or product improves as more participants join.

One of the most powerful network effects in the world today can be seen in payment processing companies like Visa (NYSE: V). The more merchants that accept Visa cards, the more account holders are likely to use the cards and vice versa. The convenience, security, and rewards programs enjoyed by cardholders make it very unlikely that inflation will have a substantial impact on this business, as can be seen in the 16% increase in Visa payments volume in 2021.