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$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
Here I am sitting on a plane to Houston. I am really thirsty. They have cold and delicious beer in the beverage cart. I am riding in coach like a loser so they won’t give me any free ones. I need to buy one. But I don’t have any money in my pocket. Doesn’t matter anyway. They don’t take money. They only take credit cards. So the only way I can drink beer is if I use my credit card. Da Da Da Da Da Daaaa Charge it!
Every time I buy a beer with a credit card, my credit card company makes money. As the economy improves, more people buy stuff. As people feel better about their personal balance sheets, they are more likely to charge stuff on their credit cards. As more people buy stuff online…they spend a crap load of money on their credit cards. Last time I checked, there is no slot on my computer to put my cash into. Face it. Our society is going cashless. Who’s going to benefit from this? Master Card of course.
Today I bought Mastercard Incorporated (MA) at 819.74. I will sell it in 4 to 6 weeks at 944.55. Here’s why I like Mastercard:
First of all, look at this chart:
Can you say OMG!! OMG!!! Holy crap look at this chart. You say OMG because the chart is a straight line to God. This stock is up 59% in the last 12 months. Meanwhile, the S&P 500 is only up 25%. This stock is more than twice as good as the S&P 500. Sure the stock price is high – that’s because this company is printing money. Want to buy a low price stock? Go find a business that is full of crappy managers. You won’t find any of those clowns at Mastercard.
MasterCard Incorporated, together with its subsidiaries, provides transaction processing and other payment-related services in the United States and internationally. The company’s payment solutions include payment programs, product development, payment processing technology, payment security, consulting, and information services and marketing, as well as loyalty and rewards solutions. It provides transaction processing services comprising transaction switching, which includes authorization, clearing, and settlement; and connectivity services, such as network access, equipment, and the transmission of authorization and settlement messages. The company also offers other payment-related services, including products and services used to prevent or detect fraudulent transactions, cardholder services, professional consulting and research services, program management services, rules compliance, account and transaction enhancement services, holograms, and publication services. In addition, it manages and licenses payment card brands, including MasterCard, Maestro, and Cirrus for use in payment programs and solutions. The company offers its payment solutions to develop and implement credit, debit, prepaid, commercial, and related payment programs and solutions for consumers, financial institutions, merchants, government entities, telecommunications companies, and other businesses.
MasterCard enjoys powerful network effects, as each new merchant that accepts their credit cards makes their networks more valuable to consumers, and each new consumer who carries their cards increases the potential pool of customers for more merchants. Mastercard is an incredible brand. Think Pepsi, McDonalds and Tide. Yes…that kind of brand identity.
Mastercard earns a small fee from every transaction that passes through their payment networks, and their tollbooth-like business models produce steady cash flow that comes to shareholders like me in the form of fast-growing dividends and share buybacks.
Every time you open your wallet, there’s probably about a 50% chance that Mastercard is about to make a little money. What other company can say that? It doesn’t matter what you buy or who you but it from, Mastercard makes money when you hand that plastic card over to the pretty lady behind the counter.
MasterCard has grown magnificently since its initial offering nearly 8 years ago. MasterCard is raising its dividend to $1.10. That's an increase of 83%. It's the second time in the last year and half the company has nearly doubled its dividend. Also, MasterCard has already promised to buy back 4 billion dollars more of its shares. Obviously management loves itself so much they want to buy the company back! The dividend hike and the buyback equate to MasterCard giving back around 80% of its cash flow back to shareholders over the next year. They are literally giving away money by owning this stock. Release the hounds!
It just gets better. In November 2013, Google unveiled the Google Wallet Card and its supported by MasterCard. Users can enter any card or bank details for their Google Wallet account. Any time a transaction is made using Google Wallet Card, as far as MasterCard is concerned, its like it was made with a MasterCard. They now handle the transaction and collect the fees no matter what funded the Google Wallet account. As Google seeks to take over the world, Mastercard will make more money. You use Google Wallet from your mobile phone. Projections for growth in mobile phone purchases are somewhere close to 50%. Wow.
The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, increase in net income, expanding profit margins and good cash flow from operations.
Additionally, MA delivered positive earnings surprises in all the last 4 quarters with an average beat of 4.2%. On Oct 31, MasterCard reported third-quarter operating earnings per share of $7.27, which modestly surpassed the ANAL-ysts Consensus Estimate of $6.95 and the year-ago quarter number of $6.17.
Revenue soared 15.6% based on better pricing, increased number of processed transactions and strong gross dollar value growth. Accordingly, operating income and margins witnessed a boost and also drove the operating cash flow.
MasterCard benefits from strong secular demand growth, meaningful international exposure, high barriers, excellent pricing power and balanced business mix. We’re not talking about some embryonic startup. This is a company with 100 billion dollars of market cap. That’s bigger than the economy of some of the world’s developing nations. Assuming MasterCard hits fourth quarter targets, revenues are forecast to grow about 12% next year and earnings about 18%. Oh they’ll blow through those numbers alright. Oh yes they will. What did YOU get for Christmas? Did you see how much the online sales grew over the holiday season? That junk didn’t get purchased with cash.
But let’s not get tied up with these minor details. It’s what’s happening internationally that’s going to make MA a monster. The company estimates that cashless payment in India accounts for 32% of overall consumer payments. This means there is tremendous upside for growth from this enormous population base. India's consumption spending will grow from $990 million in 2010 to $3.6 trillion in 2020. So even if the 32% number doesn’t grow (don’t worry, it will), Mastercard stands to gain enormously just from the demographic spending growth in India.
To harness the growth potential from India, MasterCard entered into an agreement with Central Bank of India and Suvidha Infoserve, which is India's leading retail services company, in September 2013. It will launch Central Bank of India-Suvidhaa Channel Card, which will be accepted at 65,000 Suvidha retailers across 2,800 towns in India. This will offer services like bill payments, payment of municipal taxes, travel ticketing, and shopping.
Of course we cannot forget China. The cashless payments in China account for 40% to 60% of the overall consumer payments. The overall consumer spending for China in 2013 will be $2.34 trillion and $6.2 trillion by 2020. Mastercard will be like pigs at a trough.
But as massive and as dominant as MasterCard is, they still have tremendous growth opportunities that lie ahead. That's because about 85% of global transactions still take place via cash or check. The trend toward credit card and digital payments will likely continue for many years.
Not only do they have a ridiculously strong balance sheet but MasterCard remains well positioned to benefit from higher spending volumes and many positive long-term secular trends including a consumer shift from cash to electronic payment methods, emerging market exposure, and expanding card acceptance. MasterCard's business is highly defensible and characterized by recurring revenues, low capital expenditures, high incremental margins, and high free cash flow.
Mastercard has invested about $1.9 billion in growth initiatives since 2011. About 43% of spend has been targeted on expansion/innovation (loyalty and rewards, information services, Access Prepaid, DataCash, digital initiatives, and MasterCard Labs), 35% of spend has been targeted on delivering growth (products, sales and marketing, acceptance, MasterCard Advisors), and 22% of spend as been targeted on technology and infrastructure (processing, safety and security and information technology). Despite increased investment spend, MA has increased operating margins by about 400bps since 2011.
The company is also actively looking for M&A opportunities that the company believes represent a strategic fit and meet MA's selection criteria. Potential M&A deals are expected to focus on companies that help add merchant value and use MA's robust data. The target companies must meet MA's selection criteria including returns above MasterCard's weighted average cost of capital which means that any new capital put to work should be accretive to margin growth and earnings.
Did someone say earnings? What will the earnings be? They report at the end of this month. ANAL-ysts are projecting $5.99 per share this quarter and $31.14 for the year 2014. Are they on crack, mushrooms and mescaline all rolled together? Didn’t they read the holiday spend report? Don’t they realize that people are become more comfortable with their credit card again? If the ANAL-ysts were baseball players, they’d be 0-5 in every game they play.
$$$MR. MARKET$$$ projects that Mastercard will bank $6.60 per share this quarter and increase earnings to $32.75 per share in 2014. While I think they merit a higher market multiple than what they’ve been showing (32), even if you use their trailing PE, this should get you a stock price of:
32.75 x 32 = $1048.00/share which is well past my sales target.
Don’t get confused by the fact that MA will have a 10 for 1 stock split next week. That will help the stock because the little retail investors will want to buy more shares….and I’ll have 10 times as many shares! As Mastercard would say, that’s priceless!
Here’s what the boss has to say about his company:
“We had another good quarter with growth across all geographies,” said Ajay Banga, MasterCard (MA) president and CEO. “A key component of our strategy involves using our technology and expertise to provide secure acceptance solutions that make it simpler and more convenient for people to pay and be paid. In the quarter, we partnered with technology companies and merchants to develop standards and solutions that ensure safer and more secure transactions and we launched services like Simplify Commerce, our developer-friendly solution which allows merchants to begin accepting mobile and e-Commerce payments, regardless of brand, in a matter of minutes.”
He’s a man of few words, but he sure knows how to generate profit. What’s in MY wallet? The cash I made by buying this stock, that’s what!
I am HUGE!
$$$MR. MARKET$$$
www.mrmarketishuge.com
Here I am sitting on a plane to Houston. I am really thirsty. They have cold and delicious beer in the beverage cart. I am riding in coach like a loser so they won’t give me any free ones. I need to buy one. But I don’t have any money in my pocket. Doesn’t matter anyway. They don’t take money. They only take credit cards. So the only way I can drink beer is if I use my credit card. Da Da Da Da Da Daaaa Charge it!
Every time I buy a beer with a credit card, my credit card company makes money. As the economy improves, more people buy stuff. As people feel better about their personal balance sheets, they are more likely to charge stuff on their credit cards. As more people buy stuff online…they spend a crap load of money on their credit cards. Last time I checked, there is no slot on my computer to put my cash into. Face it. Our society is going cashless. Who’s going to benefit from this? Master Card of course.
Today I bought Mastercard Incorporated (MA) at 819.74. I will sell it in 4 to 6 weeks at 944.55. Here’s why I like Mastercard:
First of all, look at this chart:
Can you say OMG!! OMG!!! Holy crap look at this chart. You say OMG because the chart is a straight line to God. This stock is up 59% in the last 12 months. Meanwhile, the S&P 500 is only up 25%. This stock is more than twice as good as the S&P 500. Sure the stock price is high – that’s because this company is printing money. Want to buy a low price stock? Go find a business that is full of crappy managers. You won’t find any of those clowns at Mastercard.
MasterCard Incorporated, together with its subsidiaries, provides transaction processing and other payment-related services in the United States and internationally. The company’s payment solutions include payment programs, product development, payment processing technology, payment security, consulting, and information services and marketing, as well as loyalty and rewards solutions. It provides transaction processing services comprising transaction switching, which includes authorization, clearing, and settlement; and connectivity services, such as network access, equipment, and the transmission of authorization and settlement messages. The company also offers other payment-related services, including products and services used to prevent or detect fraudulent transactions, cardholder services, professional consulting and research services, program management services, rules compliance, account and transaction enhancement services, holograms, and publication services. In addition, it manages and licenses payment card brands, including MasterCard, Maestro, and Cirrus for use in payment programs and solutions. The company offers its payment solutions to develop and implement credit, debit, prepaid, commercial, and related payment programs and solutions for consumers, financial institutions, merchants, government entities, telecommunications companies, and other businesses.
MasterCard enjoys powerful network effects, as each new merchant that accepts their credit cards makes their networks more valuable to consumers, and each new consumer who carries their cards increases the potential pool of customers for more merchants. Mastercard is an incredible brand. Think Pepsi, McDonalds and Tide. Yes…that kind of brand identity.
Mastercard earns a small fee from every transaction that passes through their payment networks, and their tollbooth-like business models produce steady cash flow that comes to shareholders like me in the form of fast-growing dividends and share buybacks.
Every time you open your wallet, there’s probably about a 50% chance that Mastercard is about to make a little money. What other company can say that? It doesn’t matter what you buy or who you but it from, Mastercard makes money when you hand that plastic card over to the pretty lady behind the counter.
MasterCard has grown magnificently since its initial offering nearly 8 years ago. MasterCard is raising its dividend to $1.10. That's an increase of 83%. It's the second time in the last year and half the company has nearly doubled its dividend. Also, MasterCard has already promised to buy back 4 billion dollars more of its shares. Obviously management loves itself so much they want to buy the company back! The dividend hike and the buyback equate to MasterCard giving back around 80% of its cash flow back to shareholders over the next year. They are literally giving away money by owning this stock. Release the hounds!
It just gets better. In November 2013, Google unveiled the Google Wallet Card and its supported by MasterCard. Users can enter any card or bank details for their Google Wallet account. Any time a transaction is made using Google Wallet Card, as far as MasterCard is concerned, its like it was made with a MasterCard. They now handle the transaction and collect the fees no matter what funded the Google Wallet account. As Google seeks to take over the world, Mastercard will make more money. You use Google Wallet from your mobile phone. Projections for growth in mobile phone purchases are somewhere close to 50%. Wow.
The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, increase in net income, expanding profit margins and good cash flow from operations.
Additionally, MA delivered positive earnings surprises in all the last 4 quarters with an average beat of 4.2%. On Oct 31, MasterCard reported third-quarter operating earnings per share of $7.27, which modestly surpassed the ANAL-ysts Consensus Estimate of $6.95 and the year-ago quarter number of $6.17.
Revenue soared 15.6% based on better pricing, increased number of processed transactions and strong gross dollar value growth. Accordingly, operating income and margins witnessed a boost and also drove the operating cash flow.
MasterCard benefits from strong secular demand growth, meaningful international exposure, high barriers, excellent pricing power and balanced business mix. We’re not talking about some embryonic startup. This is a company with 100 billion dollars of market cap. That’s bigger than the economy of some of the world’s developing nations. Assuming MasterCard hits fourth quarter targets, revenues are forecast to grow about 12% next year and earnings about 18%. Oh they’ll blow through those numbers alright. Oh yes they will. What did YOU get for Christmas? Did you see how much the online sales grew over the holiday season? That junk didn’t get purchased with cash.
But let’s not get tied up with these minor details. It’s what’s happening internationally that’s going to make MA a monster. The company estimates that cashless payment in India accounts for 32% of overall consumer payments. This means there is tremendous upside for growth from this enormous population base. India's consumption spending will grow from $990 million in 2010 to $3.6 trillion in 2020. So even if the 32% number doesn’t grow (don’t worry, it will), Mastercard stands to gain enormously just from the demographic spending growth in India.
To harness the growth potential from India, MasterCard entered into an agreement with Central Bank of India and Suvidha Infoserve, which is India's leading retail services company, in September 2013. It will launch Central Bank of India-Suvidhaa Channel Card, which will be accepted at 65,000 Suvidha retailers across 2,800 towns in India. This will offer services like bill payments, payment of municipal taxes, travel ticketing, and shopping.
Of course we cannot forget China. The cashless payments in China account for 40% to 60% of the overall consumer payments. The overall consumer spending for China in 2013 will be $2.34 trillion and $6.2 trillion by 2020. Mastercard will be like pigs at a trough.
But as massive and as dominant as MasterCard is, they still have tremendous growth opportunities that lie ahead. That's because about 85% of global transactions still take place via cash or check. The trend toward credit card and digital payments will likely continue for many years.
Not only do they have a ridiculously strong balance sheet but MasterCard remains well positioned to benefit from higher spending volumes and many positive long-term secular trends including a consumer shift from cash to electronic payment methods, emerging market exposure, and expanding card acceptance. MasterCard's business is highly defensible and characterized by recurring revenues, low capital expenditures, high incremental margins, and high free cash flow.
Mastercard has invested about $1.9 billion in growth initiatives since 2011. About 43% of spend has been targeted on expansion/innovation (loyalty and rewards, information services, Access Prepaid, DataCash, digital initiatives, and MasterCard Labs), 35% of spend has been targeted on delivering growth (products, sales and marketing, acceptance, MasterCard Advisors), and 22% of spend as been targeted on technology and infrastructure (processing, safety and security and information technology). Despite increased investment spend, MA has increased operating margins by about 400bps since 2011.
The company is also actively looking for M&A opportunities that the company believes represent a strategic fit and meet MA's selection criteria. Potential M&A deals are expected to focus on companies that help add merchant value and use MA's robust data. The target companies must meet MA's selection criteria including returns above MasterCard's weighted average cost of capital which means that any new capital put to work should be accretive to margin growth and earnings.
Did someone say earnings? What will the earnings be? They report at the end of this month. ANAL-ysts are projecting $5.99 per share this quarter and $31.14 for the year 2014. Are they on crack, mushrooms and mescaline all rolled together? Didn’t they read the holiday spend report? Don’t they realize that people are become more comfortable with their credit card again? If the ANAL-ysts were baseball players, they’d be 0-5 in every game they play.
$$$MR. MARKET$$$ projects that Mastercard will bank $6.60 per share this quarter and increase earnings to $32.75 per share in 2014. While I think they merit a higher market multiple than what they’ve been showing (32), even if you use their trailing PE, this should get you a stock price of:
32.75 x 32 = $1048.00/share which is well past my sales target.
Don’t get confused by the fact that MA will have a 10 for 1 stock split next week. That will help the stock because the little retail investors will want to buy more shares….and I’ll have 10 times as many shares! As Mastercard would say, that’s priceless!
Here’s what the boss has to say about his company:
“We had another good quarter with growth across all geographies,” said Ajay Banga, MasterCard (MA) president and CEO. “A key component of our strategy involves using our technology and expertise to provide secure acceptance solutions that make it simpler and more convenient for people to pay and be paid. In the quarter, we partnered with technology companies and merchants to develop standards and solutions that ensure safer and more secure transactions and we launched services like Simplify Commerce, our developer-friendly solution which allows merchants to begin accepting mobile and e-Commerce payments, regardless of brand, in a matter of minutes.”
He’s a man of few words, but he sure knows how to generate profit. What’s in MY wallet? The cash I made by buying this stock, that’s what!
I am HUGE!
$$$MR. MARKET$$$
www.mrmarketishuge.com
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