Visa (V) and Mastercard (MA) on a roll!
5-30-08: In today’s current market condition, there are very few places to hide. It seem no matter where you decide to invest, you will likely be impacted by the high price of oil. As we have mentioned before, oil make this economy run as many aspects of our lives are tied to crude price. It all starts with the price of gasoline which trickles down to things like food. All of the sudden, your dollar doesn’t go very far. In the face of economic uncertainly, there are some companies which remains to benefit. Two companies we like, Visa (V) and Mastercard (MA). In our view, these two companies will continue to grow and benefit despite the dismal macro economic picture.
Visa and Mastercard has a lock on credit card transactions. Their business model is simple; they charge a fee for each transaction. Every time we decide to use plastic instead of cash, Visa and Mastercard goes ka-ching! As we move closer to a cashless society, these two companies can only grow.
Consider this, when was the last time you used cash to pay for anything. If you’re like most people, using cash to pay for your purchases are becoming few and in between. In addition to credit card transactions, debit card is now growing in usage. This is a new market that has been growing in the past 5 years. In our view, this is a huge opportunities going forward.
Credit card usage has primarily been popular in the United States. This is all starting to change. The European, Asian countries are now embracing credit as their economy becomes more sophisticated. The international market is where the growth will be in the next decade. We’re bullish about the prospect of growth in emerging markets.
Both Visa and Mastercard are newly public companies, but they’ve been around for a long time. Unlike most companies that decide to go public only to raise capital, these two companies didn’t need capital. Their cash flow was steady and profitable. Trading today on the high end, we typically would avoid such stocks. However, we do believe the opportunities for these two companies are endless. We are always looking for opportunities to buy more shares on any weakness.
