Mastercard Inc. (MA)

Sold some recently because it was too overbought. It might pull back further, but its long term trendline is still good. He suggests looking at the stock at about $160. Don’t buy the stock when it is falling. Buy after it stops falling and starts moving back to resume its uptrend.

The chart is very bullish, but the RSI is very high. Historically for this company, when the RSI reaches high levels, it usually corrects lower. His advice would be to trim a little.

When looking at names like this and Visa (V-N), the thesis is very straightforward. Spending around the world is growing, not just short term, but long-term when you look at developing countries. Those digital methods continue to take market share away from cash. There are going to be more people moving to digital payments and plastic, and away from cash. Both stocks are getting a little expensive, so keep an eye out for the mood of the general market. In this bull market continues, these names should benefit from that. However, when the bull market starts to wane a little, you probably want to take some profits off the table.

(A Top Pick Jan 24/17. Up 54%.) A classic Wide Moat company. The credit card space is dominated by MasterCard and Visa (V-N). Credit card penetration in places like Europe, Asia, Africa, South America is nothing like it is here. There is still a tremendous runway for them to be adding new customers. It’s the kind of company you can buy and literally go to sleep for 30 years and not worry about it. He would be indifferent whether you are in MasterCard or Visa.

(A Top Pick Oct 28/16. Up 35%.) This had a little bit of a down period at the very end.

V-N vs. MA-N. They keep going up. V-N is slightly better valuation than M-N and he prefers to by M-N when it is two or three multiple points between the two. Generally speaking they are both great and have a huge runway ahead of them. A lot of countries are still just scratching the surface. He just owns V-N right now.

She likes it. Consumer credit is one area that is growing. She sees growth here as well as in international markets. Online retail is also growing the number credit card transactions.

When the consumer is at risk, such as in an economic slowdown, it is this one that underperforms. When the economy performs well and credit is building it does well. He is cautious right now. He thinks it is extended and is late cycle. This is a payment processor and not a lender. Non-payment risk goes to the underlying financial institutions.

MasterCard (MA-N), Visa (V-N) or American Express (AXP-N)? Of the 3, he prefers Visa, the largest of the 3. This one is a bit more international, but trades a little higher on a multiple basis. American Express is not a favourable one in his view.

MasterCard (MA-N) or Visa (V-N)? Either of these would be good. They trade at multiples that are generally significantly higher than market multiples. Both companies capture the payments, and the threat of fees going down is low. This one has a little more international exposure, and is a bit more advanced on the technology side, but Visa is the dominant player.

(A Top Pick April 13/16. Up 23%.) He likes the space. Great defensible businesses. There is nothing wrong with the name. He likes the secular shift in consumer spending patterns. The baby boomers are increasingly using Apple pay, Tap, etc.

(A Top Pick May 13/16. Up 19%.) His current target price is about $130. Whether it is MasterCard or Visa, the world is going cashless. He will continue to hold a 4% position in this.

She likes the space, but owns Visa (V-N) instead. Both companies are a play on the secular change to digital payments. Visa is the larger of the 2. You want scale to be cost competitive. Also, Visa just bought Visa Europe last year, and there should be a lot of operating leverage as they grow the European business. Both companies are well-managed.

(Top Pick Jan 24/17, Up 2%) Two players dominate the industry. Other parts of the world are not that comfortable yet with using credit cards, so there is room for growth.

Everything is moving along extremely well in this space. One of the big issues is the Durban report, who have been ruling on exchange fees/transaction fees and trying to get some clarity. That would have been very adversarial towards the credit card companies, but recent news indicates it might have been better than what they had thought. The broad theme of online credit card processing is one that is not going to end.