Mastercard Inc. (MA)

 Visa and Mastercard have been treading water the past year because the market has been fixated on AI, but that money has been rotating out of AI into places like credit cards. The two companies have some of the best business models, big moats and trading at attractive PEs, though neither are at decades-long low PEs.  

This and Visa have been weak because cash-to-card conversion has historically been the easiest thing for them to do but is now over. Value-added services are instead driving more growth. Agentic AI traffic is about to go parabolic, so can the cards play the role of authentication layer? He thinks so, and they should.  Stablecoins and peer-to-peer transactions are not big deals, not major threats.

Excellent buy here. Space has been under pressure from stablecoin and the like. Benefits from digitization of cash. Offers security services, as well as data for retailers.

Both are phenomenal businesses. Comparable on valuation and share price performance. If you own one, don't switch.

His clients own Visa, and have for a very long time. Makes the most sense for him as more payments become digitized and V captures more market share. It's the largest payment network, so its profitability is a bit higher on margins. Bit north of 20x PE, FCF yield north of 4%. Attractive valuation for an essential business.

Credit cards are a fantastic business. Any fear over disruption is massively overblown. These companies are massively capitalized and investing heavily in technology. Any dip is a great buy.

He owns Mastercard but not Visa. However they are both crown jewels in the market and good to buy. The rise in Agentic commerce and digital currency could be a concern but they have strategies o deal with it. The valuation has come down with multiple compressions.

Net beneficiary of inflation. A category to buy on weakness, but only as it applies to V and MA for their quality (he doesn't like any of the others).

He owns Visa instead, as it has a broader offering.

One of two dominant players in the space. Considered more international. Credit card companies actually make a vast amount of $$ on the foreign exchange for transactions.

High quality, strong fundamentals, but stock went flat. Growth going sideways. He'd revisit if an opportunity arose.

Both MA and Visa have durable, long-term franchises. Very difficult to mess with a payments system. Incredible ability to invest in technology. It would be unusual to see them disrupted by new entrants. See his Top Picks.

Down 5% YOY. Overhang has been potential disruption in digital payments. Still likes it. Benefiting from the broader theme of moving from cash to credit. Feels it'll come out still looking good. Growing revenues 10-11%. Probably 15% earnings growth. Valuation not stretched at 22-23x PE. He's positive.

They are among the highest-quality businesses in the world. They get knocked around occasionally over concerns about interchange fees or PayPal or something threatening them. There's always something. If you own, you've done very well, and have a long-term horizon. Doesn't prefer one. You can own both. Buy it and forget it.

Just as with MA (which he also owns), Visa dominates fees charged and, therefore, controls its earnings. Very few players can upend them. Pursuing more technology advances. Visa trades at 27x forward PE, growing at probably 15+%. Very good valuation for a company with only 1 major competitor.

Visa has been weak technically, not participating in recent market moves. Still above 200-day MA today, and that's moving higher. Up 14% in last 12 months, which isn't that bad ;)

This year, there have been fears of stablecoins and cryptos displacing both Visa and Mastercard  However, both companies are too entrenched with merchants and customers to displace. There are few incentives for consumers to adopt stablecoin. He continues to like them.

Likes the long-term secular growth. 50% of world's transactions are still in cash. Seeing more cross-border transactions and leisure travel. Few competitors. Always trades at a bit of a premium. Still likes.