Mastercard Inc. (MA)

Re-rated to too high a multiple. Both it and Visa are currently at north of 40x current earnings, too high for potential growth even if that growth is exciting. He thinks fintech is very highly priced, many at 10-12x revenue. This includes PayPal, Square. Great companies and management. Future of financial industry will be not a competition between banks and fintech, but a partnership.

Will benefit from cross-border travel, and B2B penetration with value-added services they're layering on. Travel will add 6-7% EPS growth and new initiatives in C2B will add 11% volume growth through 2024. Value-added services include fraud authentication and analytics. He prefers this to Visa because of better exposure to developing markets and higher growth. MA will be 15% higher in 12-18 months. (Analysts’ price target is $429.84)

Smaller than Visa, more leveraged on an international scale, especially with travel and cross-border transactions. 18B in expected 2021 revenue. Faster than expected vaccine rollout will fuel consumer spending in a return to a more normal economic environment. Expects 18% annualized growth. Long-term, secular trend away from cash. Yield is 0.49%. (Analysts’ price target is $428.66)

He owns MA instead of Visa, but both stocks will have similar performance. MA has higher exposure to Europe and growth geographies. Both are high quality compounders. Both will benefit as we go to a cashless society and from the recovery of cross-border travel. Sees topline growth at 18%, and EPS growth up to 20%.

Paypal earns $3.50-$4.00 per share, which is around 80x earnings. People pay for expectation of flow of cashflow. There is hype in fintech. You must marry the opportunity for the price of it. Fintech presents a big opportunity. However, is the price worth it? Would pass on Paypal, and also on Mastercard even. Too expensive right now.

$1.9 trillion stimulus relief passes into law. Never underestimate U.S. consumers wanting to spend. Look at HOW they spend, namely Mastercard, which made a new all-time high today; Visa came within a whisper of a new high; and even American Express has been on fire. Stay with all of these.

MA vs. V vs. AXP Likes the story of both V and MA. They take no credit risk, just a tollbooth. American Express is very different, as they do take on risk. We're going to a cashless society. Great growth businesses, little capital expenditure. V has lots of growth yet in Asia. Once travel starts up again, V numbers should pick up.

Likes Visa and Mastercard. Both driven by the same metrics. Trans-border transaction volume has declined due to less traveling. Paypal is very e-commerce driven. Has continued to buy Visa with new client money in anticipation for a pickup in leisure and business travel.

PayPal may be a threat, but he's holding onto MA because cross-border travel in the coming reopening will boost their business. They report Thursday.

A past pick from summer 2020 when we started turning the corner on the pandemic All credit card companies have been losing ground recently, pressured by online payments stocks like PayPal and Square. He expected this to reverse once we got vaccinations, but then the banks caught fire and ignored credit cards. He thinks MA is a great company, but Wall Street disagrees. Cross-border travel, when it returns, may help MA. Maybe.