Say No To Trading
Public Markets Investor, Opportunistic Buying & Cost-Basis Management
Visa and Mastercard are super reliable businesses that face almost no risk beyond regulation, take no credit risk and profit from inflation and rising card spending, so every drawdown is a chance to buy more of them instead of riskier stocks. Visa just posted a rare 10% earnings pop and is 14% off its early-month lows; unless Mastercard's earnings disappoint badly, both are past needing to be watched closely. x.comÂ
Mastercard may be the only scaled, capital-light network benefiting from AI, with bloated technical debt uniquely addressable by coding tools. Nominal inflation-linked recurring revenues and hardware attach add to the case at low-teens free-cash-flow yields. While payments getting bid in a red market probably signals the rally is over, these traits could mean it is not. x.comÂ
Visa and Mastercard look like attractive, safe cash machines at decade-low valuations, likely compounding 10-15% a year from here. Mastercard trades at 23x forward earnings, its lowest in a decade, and Visa at 22x; Mastercard just bounced off its 200-week moving average, untouched since 2022. They will not 10x in ten years but should protect the downside. Visa is slightly preferred for its sheer size, though Mastercard grows faster. x.comÂ
Visa's roughly 30x earnings multiple and $750 billion valuation leave less upside than other opportunities, even if it keeps executing; the best case may be another doubling over a few years. Its once-impenetrable moat may look different in five years, while its reputation as a safe compounder is already priced in. This is a relative judgment, not a prediction that Visa cannot keep rising. x.com x.com x.com x.com x.comÂ
Visa and Mastercard are priced for a disruption that looks overdone, leaving two of the best compounders at decade-low multiples. Mastercard trades 34% below its 10-year median P/E, and Visa is similar. Stablecoins are about 2% of Visa's volume and years from replacing daily card use. The Credit Card Competition Act could cut fees from about 1.8-2.0% to 1.25%, with $10 billion-plus of industry revenue at stake, but analysts put its passage odds at 30-40%. x.comÂ
Mastercard is the preferred pick in the Visa-Mastercard duopoly because it grows faster, though both are superb and owning either or both is reasonable. Visa leads on scale with about 60% of global card volume versus Mastercard's 30%, and is more defensive given its big US debit share. Mastercard earns more from higher-fee cross-border transactions and sells services like analytics, fraud prevention and cybersecurity, a recurring segment growing 20%+ a year. Visa's operating margin tops 65%. … Show more
Visa and Mastercard, as AI losers, can do nothing to change the narrative except accelerate. Unless sentiment shifts, AI progress stops or the paradigm changes, it is accelerate or die. Markets may eventually adjust if such vulnerable businesses stay unimpacted, but that may take several years. x.com x.com x.com x.comÂ
Visa's volume and earnings growth show its network benefits from the global shift to digital payments. FY revenue rose 15% to $45.9B, adjusted EPS 16%, payments volume 9% and cross-border volume 13%. One of the world's highest-quality businesses, it is among the few most comfortable to hold for the next decade. Adjusted operating expenses rose 16%, ahead of revenue; client incentives rose 16% to $18.3B but threaten margins only if they get out of control. Regulation and litigation remain risks. … Show more
Mastercard and Visa do best in an inflationary environment with growth holding up, because they are toll booths on nominal spending. So far everything in the consumer's basket has gone up except rent, one of the few items not paid by credit card, and Mastercard's expected low-teens topline growth over the next few years shows the tailwinds. A recession would offset some of the higher gross dollar volume, and deflation would have the opposite effect. x.com x.comÂ
Visa's pricing power and duopoly are in trouble as merchants resist 3%+ interchange fees and new ways to shop emerge. If Visa loses the CCCA fight, its entire moat is at stake: opening rails to another network would be a big push toward stablecoins, with agent commerce an even greater push. Australia's fee cut adds global pressure. China's opening is positive but incremental and years away if China follows through, amid domestic competition. x.comÂ
Visa and Mastercard run the most powerful business model ever built: operational efficiency wins market share, share lifts profitability, profits are reinvested at high returns, and that deepens efficiency, repeating forever. As a duopoly, they crush the weakest rivals rather than competing with the best, and the market is split only two ways. x.comÂ
