Mastercard Inc. (MA)

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.

Owns Visa. If you look back to when it first became public, it has been a solid upward movement, bar the financial crisis. Effectively, it is the mechanism to fund purchases during Covid. Move away from cash will continue and it should be a structural grower. Prefers Visa, especially with Visa Europe that was incorporated into it. The two present the same risks.

Prefers this over Visa. It has a higher growth runway than Visa. Expects $15B in revenues. Near-term, a return to a more normal world will help Mastercard and spending volumes. Travel and cross-boarder transactions will come back and help volume. Secular shift away from cash will also continue to be a tailwind. (Analysts’ price target is $356.29)

Has done extremely well on both organic growth and on the market's re-rating. Will be beneficiaries as we move more to plastic in the post-pandemic world. Trading at a high 30s multiple, a bit extreme. Fewer opportunities and more risk in the face of Square, PayPal, and the like.

You can probably enter here if you plan to hold it for the long term. It will continue to grow. Visa has grown double digits, but Mastercard's stock has performed better. The move away from physical money will only continue and accelerate.

It has more growth than Visa, though either one is fine to buy. Lots of running room for both. Global payments is bigger than global GDP. It's such a big market. Both generate tons of free cash flow and don't need to invest a lot of capital. Fintech companies like Paypal and Square do well, but haven't replaced these two companies. Foreign exchange profits from tourists is down, but will eventually recover. (Analysts’ price target is $326.09)

V-N vs. MA-N. He is so happy to own V-N and is kicking himself for not owning MasterCard. Shopping online promotes use of credit cards. There are so many long term tailwinds that you have to own them.

MA-N vs. V-N. Own either this or V-N. We saw adoption of tap to pay. People are doing a lot more tap to pay. Buy here. He prefers V-N over MA-N.

Q1 earnings strong? He owns V instead of MA. Both are in a great position in the e-commerce space with their ability to accept digital payments. The earnings announcement by MA today were strong, but transactions were down. If it takes time to see things recover, their strong cash flow position will allow them to buy back shares and shore up their balance sheet. MA trades around 30 times earnings, so he would wait for a pullback. He thinks both MA and V may be 15% over valued right now.