COMPANY PROFILE

Mastercard is a technology company in the global payments industry. Their global payments processing network connects consumers, financial institutions, merchants, governments and businesses in more than 210 countries. Mastercard believes their total addressable market opportunity is vastly greater than most analysts think. There aren’t many companies with these characteristics.

Style Factor Benefits

From a factor scoring perspective versus the other 199 brands in the brands index, here’s where Mastercard scores well as of 1/3/2022:

• 99% high ROIC over WACC (weighted cost of capital)

• 96% high Moat rating across a blend of important competitive MOAT metrics

• 85% high absolute free cash flow

• 77% high projected 3YR dividend growth

• 99% high ROIC

• The stock is depressed currently due to cross-border travel restrictions so many of the datapoint we track are artificially lower than they would otherwise be, this stock has high recovery value in price and financial metrics.

1/31/2022 Update

Earnings: Beats across the board. Quarters will continue to be lumpy but the trends remain very positive and these brands are FCF machines. Core holding, a buy on dips imo.

The death of using credit and debt cards has been greatly exaggerated. Visa & MA have highly predictable and stable businesses and are at the center of a secular theme that seems to have endless opportunities. The bad news, MA and all the other payment stocks are expensive. With the kind of recurring revenue, high free cash flow generation and inflation hedges, I wouldn’t expect these stocks to be cheap. Over the last year and a half, both have been lagging and their valuations are as low relative to the S&P 500 as they have been in a very long time. The travel recovery is already here and it has wicked recovery potential for years to come. In the meantime, they buyback stock aggressively and recently re-upped their buyback so they can continue to be aggressive when the stock is on sale. Eventually, these accretive buybacks will offer the ability to enhance some real earnings beats and a analyst upgrade cycle of estimates will begin. These stocks are at the top of the weightings in the portfolio while they are low and aggressively buying back stock in anticipation of the cross-border recovery. Like Visa & American Express, Mastercard is a household name and continues to benefit from the switch from cash to debt & credit cards. The card processing companies like MA, Visa, Paypal, Square,etc are also wonderful inflation hedges. As the price of everything we need and want goes up, so too do the small transactions these companies capture in revenue. MA continues to invest its strong cash flow into new fintech innovations and partnerships while making international acquisitions.