Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: Liberty on September 14, 2011, 08:34:01 AM

Title: MA - Mastercard
Post by: Liberty on September 14, 2011, 08:34:01 AM
A company with a strong moat, nice margins, strong growth potential, and apparently a big advantage over Visa in China.

I've only just started digging, so I don't have an IV estimate yet, and I could find things I dislike, but so far it certainly looks like a company that deserves its own thread here.

For those also looking, there's a year-old writeup on the VIC that might be a good starting point.

Feel free to share your MA insights here :)
Title: Re: MA - Mastercard
Post by: mankap on September 15, 2011, 11:31:30 AM
Thanks Liberty

I am also interested in MA.I have started reading about MA.
I agree it has a strong moat and big exposure to emerging markets.It is paying lot of attention to emerging markets.
What kind of of growth rate can we expect MA to have ?
Title: Re: MA - Mastercard
Post by: Kiltacular on September 15, 2011, 12:12:01 PM
These three investor day transcripts may be helpful in thinking about MA. 

The first is possibly a bit old (2008): http://www.sequoiafund.com/Reports/Transcript08.pdf

From 2010: http://www.sequoiafund.com/Reports/Transcript10.pdf

From 2011: http://www.sequoiafund.com/Reports/Transcript11.pdf
Title: Re: MA - Mastercard
Post by: oddballstocks on September 15, 2011, 12:35:10 PM
The latest Sequoia investor day has some good thoughts regarding them.  I will admit I'm biased, I purchased right after the IPO and have held tight so yeah, I like the company and what it's done for my wallet.

If I remember correctly they were targeting 20% growth YoY, I know that slipped during the recession but based on some comments I've seen I think that's their target again.

Back when I was looking into them Citi had some great research, it was a 40-50pg note detailing in excruciating detail how the three party payment system worked.  It was a long read but well worth it, if you have access to sell-side stuff you should be able to get it.  The note is from 2006 but the system hasn't changed since then in any material way.
Title: Re: MA - Mastercard
Post by: Liberty on September 16, 2011, 08:52:12 PM
The latest Sequoia investor day has some good thoughts regarding them.  I will admit I'm biased, I purchased right after the IPO and have held tight so yeah, I like the company and what it's done for my wallet.

Congrats, it's been a nice run. Out of curiosity, what made you choose MA over V? Looks like they're following each other pretty closely, so I suppose it doesn't make that much of a difference (at least so far), but I wonder if they'll start to diverge more as their fortunes are more and more dependent on emerging markets..
Title: Re: MA - Mastercard
Post by: Liberty on September 17, 2011, 09:06:07 AM
This analysis is a bit older, but could be useful:

http://m100.marketocracy.com/rmcduff_RMG1/2010/05/mastercard_nyse_ma_22309_price.html

Interesting that almost none of Visa is held by insiders while about 10% of MA is (according to Yahoo finance, anyways).

Does anyone have color on MA's management? Have they shown to be talented, ethical, energetic?
Title: Re: MA - Mastercard
Post by: Liberty on October 04, 2011, 10:21:11 AM
Nice drop in the past few days. Hopefully it continues on that trajectory for a while longer  ;)
Title: Re: MA - Mastercard
Post by: oddballstocks on October 04, 2011, 10:37:21 AM
Liberty

Just realized I never answered your question, anyways I didn't have to choose, MA went public about a year before Visa and I bought shortly after the IPO.

I do like MA better, you get the entire company including European operations whereas Visa is ex-Europe.  For the past few years I envied the Visa position of having a larger percentage in debit transactions but after the Dodd-Frank this has turned into a big negative.  I don't remember the exact breakdowns but MA has something around 20% debit vs 80% credit.

As for the management I haven't really been wowed, I view MA as the type of company a monkey can run, they are entrenched and as long as nothing is screwed up the cash machine keeps printing.  So far that's been true, the BOD is a pet peeve of mine.  If you look at the bio of each director they're involved in 5-10 other companies each, I don't know how they could have enough time to fully understand any company.  I know the CEO is newer, he was the head of a division and did well in that regard so he was promoted up.

Title: Re: MA - Mastercard
Post by: Liberty on October 04, 2011, 10:48:55 AM
Thanks! This one is definitely in the top tier of my watchlist, but I'm still struggling at valuing it and knowing what's cheap enough to buy and what isn't.. Do you have a rule of thumb for what kind of P/E or FCF yield would be considered attractive for MA considering its growth and moat?
Title: Re: MA - Mastercard
Post by: oddballstocks on October 04, 2011, 11:20:34 AM
I believe management has been targeting 20% YoY growth for the past few years.  During 08/09 growth slowed and the price dropped like a rock.  I think they're back in the low 20s and expect this to remain going forward.

I know for myself I try to target a 10% hurdle rate being ROE/(P/B).  That's my hurdle for a decent business trading at a cheap multiple.  I've violated that rule for net-net's or asset/turnarounds.  Right now for MA I have the what I call investor return (number I mentioned above) calculated at 5.86%.  To get to 10% MA would need to trade at a P/B of 4 or a price of $156, doubtful we'll see that.

Of course in that calculation there is no adjustment for the intangible of MA's network, or the brand. 

I understand your problem, I've looked at Visa on and off for the past few years and struggle with what a cheap value is, even in light of holding MA.  I think the best approach is to back into the market growth rate based on a few different discount rate scenarios and then judge accordingly. 

Oh, I just looked, Morningstar estimates a 13% revenue growth rate with a 8% terminal rate and a sustainable 46% operating margin.  So this is one data point.

Best of luck!
Title: Re: MA - Mastercard
Post by: Liberty on December 01, 2014, 09:47:23 AM
In the "the one that got away" category...

I've started thinking about V and MA again lately, and went over my 2011 notes and some recent filings and transcripts... Wish I had pulled the trigger back when I first started this thread.

Hopefully there will be another nice entry opportunity at some point. I doubt it'll ever be super-cheap, though. Hard to find a better business of this scale. Not surprising that Todd Combs (I assume it's him) has been buying both members of the duopoly.

This old piece on two-sided markets is interesting:

http://www.gurufocus.com/news/155261/twosided-markets-and-mastercards-moat-ma
Title: Re: MA - Mastercard
Post by: racemize on December 01, 2014, 02:19:19 PM
In the "the one that got away" category...

I've started thinking about V and MA again lately, and went over my 2011 notes and some recent filings and transcripts... Wish I had pulled the trigger back when I first started this thread.

Hopefully there will be another nice entry opportunity at some point. I doubt it'll ever be super-cheap, though. Hard to find a better business of this scale. Not surprising that Todd Combs (I assume it's him) has been buying both members of the duopoly.

This old piece on two-sided markets is interesting:

http://www.gurufocus.com/news/155261/twosided-markets-and-mastercards-moat-ma

That article is from one of our fellow board members, FYI.
Title: Re: MA - Mastercard
Post by: Liberty on December 01, 2014, 04:14:44 PM
In the "the one that got away" category...

I've started thinking about V and MA again lately, and went over my 2011 notes and some recent filings and transcripts... Wish I had pulled the trigger back when I first started this thread.

Hopefully there will be another nice entry opportunity at some point. I doubt it'll ever be super-cheap, though. Hard to find a better business of this scale. Not surprising that Todd Combs (I assume it's him) has been buying both members of the duopoly.

This old piece on two-sided markets is interesting:

http://www.gurufocus.com/news/155261/twosided-markets-and-mastercards-moat-ma

That article is from one of our fellow board members, FYI.

Really? May he raise his hand, please?

I was just thinking yesterday that it's too bad this author doesn't write anymore, and I actually tried to search for another blog or twitter account using his name (maybe he goes under un alias?) and was disappointed to not find anything. Had I known he was here, I would have asked directly :)

I'm certainly curious to know if he still holds MA (V?), and what his updated thoughts are.
Title: Re: MA - Mastercard
Post by: rishig on December 01, 2014, 04:24:16 PM
Liberty,

Raising my hand. Here is the original write up from 2010 when I purchased MA.
http://www.investorsantholgy.com/2010/12/30/mastercard-the-prize-of-owning-the-priceless-brand/

I recently presented to a small group of folks  (at Google, my workplace) interested in value investing on why Wall Street mispriced MasterCard.
https://docs.google.com/presentation/d/1fROziaKAcmM0NYM6zc3LApiTVBBBmLTJ_w9sBiAVrSU/edit#slide=id.g1259289b7_05

MA/V are a 10% position for me today. This is the only compounder type business I hold in my portfolio, the rest of the portfolio are reasonable businesses at cheap valuation. Happy to answer any questions, although I doubt there is anything I can say that you don't already know.

- Rishi
Title: Re: MA - Mastercard
Post by: jrunner on December 01, 2014, 07:16:09 PM
Good stuff, Rishi! Thanks for sharing!
Title: Re: MA - Mastercard
Post by: jschembs on December 01, 2014, 08:25:31 PM
Liberty,

Raising my hand. Here is the original write up from 2010 when I purchased MA.
http://www.investorsantholgy.com/2010/12/30/mastercard-the-prize-of-owning-the-priceless-brand/

I recently presented to a small group of folks  (at Google, my workplace) interested in value investing on why Wall Street mispriced MasterCard.
https://docs.google.com/presentation/d/1fROziaKAcmM0NYM6zc3LApiTVBBBmLTJ_w9sBiAVrSU/edit#slide=id.g1259289b7_05

MA/V are a 10% position for me today. This is the only compounder type business I hold in my portfolio, the rest of the portfolio are reasonable businesses at cheap valuation. Happy to answer any questions, although I doubt there is anything I can say that you don't already know.

- Rishi

That is impressive, Rishi. Curious your thoughts on the equity of your employer?
Title: Re: MA - Mastercard
Post by: rishig on December 01, 2014, 08:47:13 PM
That is impressive, Rishi. Curious your thoughts on the equity of your employer?

I love working at Google. I work on Google's compute infrastructure. More on it here:
http://www.wired.com/2013/03/google-borg-twitter-mesos/

Unfortunately, I can't comment on Google as an investment. I am considered an insider.
Title: Re: MA - Mastercard
Post by: saltybit on December 01, 2014, 09:18:06 PM
That is impressive, Rishi. Curious your thoughts on the equity of your employer?

I love working at Google. I work on Google's compute infrastructure. More on it here:
http://www.wired.com/2013/03/google-borg-twitter-mesos/

Unfortunately, I can't comment on Google as an investment. I am considered an insider.

Hi Rishi,
Is there a way to subscribe by email to your blog? http://investorsanthology.com/
Title: Re: MA - Mastercard
Post by: rishig on December 01, 2014, 09:30:10 PM
That is impressive, Rishi. Curious your thoughts on the equity of your employer?

I love working at Google. I work on Google's compute infrastructure. More on it here:
http://www.wired.com/2013/03/google-borg-twitter-mesos/

Unfortunately, I can't comment on Google as an investment. I am considered an insider.

Hi Rishi,
Is there a way to subscribe by email to your blog? http://investorsanthology.com/

Right now, it's pretty bare bones. I am migrating it to a new platform. Check back in a few weeks.
Title: Re: MA - Mastercard
Post by: Liberty on December 02, 2014, 08:15:46 AM
Liberty,

Raising my hand. Here is the original write up from 2010 when I purchased MA.
http://www.investorsantholgy.com/2010/12/30/mastercard-the-prize-of-owning-the-priceless-brand/

I recently presented to a small group of folks  (at Google, my workplace) interested in value investing on why Wall Street mispriced MasterCard.
https://docs.google.com/presentation/d/1fROziaKAcmM0NYM6zc3LApiTVBBBmLTJ_w9sBiAVrSU/edit#slide=id.g1259289b7_05

MA/V are a 10% position for me today. This is the only compounder type business I hold in my portfolio, the rest of the portfolio are reasonable businesses at cheap valuation. Happy to answer any questions, although I doubt there is anything I can say that you don't already know.

- Rishi

Hi Rishi,

Glad to find you so close to home ;)

And happy to see that you are still writing. Your recent piece on See's Candies was quite good and highlights just how good these asset-light, high-ROIC, differentiated/moated businesses can be if you can find them at fair (or better!) prices. It's an interesting exercise to look at the multiples you could have paid for some of these 10-20-30 years ago and still have beaten the market (caveat: I know, survivorship bias, etc. Not all cigar butt investments work out either).

Which brings me to MA (and V, since they're almost the same thing). I'd be curious to know about how you think about fair value (is it a specific FCF multiple?), at what FCF multiple would you be buying more and at what multiple would you be selling?

Or is it more of a "I'm hanging on to this one until the story changes, any non-crazy overpricing will be corrected over time, I'd rather ride these out than sell and risk missing out on years of good growth, and non-crazy underpricing will be good for buybacks, so let's do nothing unless in crazy territory". Not to put words in your mouth, but that's how I think about some things :)

IMO the biggest challenge with these very high quality businesses is what value to assign to the quality. With a business that is ok-good, it might be fairly easy to say "ok, growth is about X, normalized earning power is about Y, at a conservative multiple it's worth Z, and right now it's selling at 0.6x Z so I can buy and wait for it to revert to about Z". But with high quality 'compounders', I feel like the margin of safety is in the attributes that will protect the business and keep it growing value at superior rates over long periods; if your analysis of these is correct, paying what seems a high price for an ordinary business can actually be a bargain, and if you're wrong, well... It's the same as being wrong on the true IV/earning power of an ok-good business. Your margin of safety could turn out to have been an illusion all along...

All this to say that I'm curious to learn more about how you value that quality and how much extra you are willing to pay for it in the case of MA (and V).

Looking forward to your next blog posts. Cheers!
Title: Re: MA - Mastercard
Post by: Liberty on December 02, 2014, 11:19:21 AM
Speak of the devil. MA increased its dividend and buyback today:

http://newsroom.mastercard.com/press-releases/mastercard-board-directors-announces-increase-quarterly-dividend-3-75-billion-class-share-repurchase-program/

Thought this graph was interesting:

(http://i.imgur.com/KuzxG50.png)
Title: Re: MA - Mastercard
Post by: rishig on December 02, 2014, 02:17:21 PM
Liberty,

Raising my hand. Here is the original write up from 2010 when I purchased MA.
http://www.investorsantholgy.com/2010/12/30/mastercard-the-prize-of-owning-the-priceless-brand/

I recently presented to a small group of folks  (at Google, my workplace) interested in value investing on why Wall Street mispriced MasterCard.
https://docs.google.com/presentation/d/1fROziaKAcmM0NYM6zc3LApiTVBBBmLTJ_w9sBiAVrSU/edit#slide=id.g1259289b7_05

MA/V are a 10% position for me today. This is the only compounder type business I hold in my portfolio, the rest of the portfolio are reasonable businesses at cheap valuation. Happy to answer any questions, although I doubt there is anything I can say that you don't already know.

- Rishi

Hi Rishi,

Glad to find you so close to home ;)

And happy to see that you are still writing. Your recent piece on See's Candies was quite good and highlights just how good these asset-light, high-ROIC, differentiated/moated businesses can be if you can find them at fair (or better!) prices. It's an interesting exercise to look at the multiples you could have paid for some of these 10-20-30 years ago and still have beaten the market (caveat: I know, survivorship bias, etc. Not all cigar butt investments work out either).

Which brings me to MA (and V, since they're almost the same thing). I'd be curious to know about how you think about fair value (is it a specific FCF multiple?), at what FCF multiple would you be buying more and at what multiple would you be selling?

Or is it more of a "I'm hanging on to this one until the story changes, any non-crazy overpricing will be corrected over time, I'd rather ride these out than sell and risk missing out on years of good growth, and non-crazy underpricing will be good for buybacks, so let's do nothing unless in crazy territory". Not to put words in your mouth, but that's how I think about some things :)

IMO the biggest challenge with these very high quality businesses is what value to assign to the quality. With a business that is ok-good, it might be fairly easy to say "ok, growth is about X, normalized earning power is about Y, at a conservative multiple it's worth Z, and right now it's selling at 0.6x Z so I can buy and wait for it to revert to about Z". But with high quality 'compounders', I feel like the margin of safety is in the attributes that will protect the business and keep it growing value at superior rates over long periods; if your analysis of these is correct, paying what seems a high price for an ordinary business can actually be a bargain, and if you're wrong, well... It's the same as being wrong on the true IV/earning power of an ok-good business. Your margin of safety could turn out to have been an illusion all along...

All this to say that I'm curious to learn more about how you value that quality and how much extra you are willing to pay for it in the case of MA (and V).

Looking forward to your next blog posts. Cheers!

I think with compounders you have to answer really tough questions - you have to think about competitive advantages, industry landscape, growth prospects. I don't consider myself smart enough to look too far into the future and be able to predict these kinds of business questions. To be able to make higher than market returns on these compounder type businesses one has to make these predictions and be right about it, especially when you pay a high P/E. Warren Buffett is very smart, yet he has less than a dozen stocks in total (that are not fully owned) over a decade. As per Morningstar's universe, there are 266 wide moat stocks. Their definition of wide moat is one where the competitive advantages last for more than 20 years. I think they are being overly zealous in my opinion.

Having said that, here is what I think about MA/V
- Long runway of growth: 85% of transaction globally are still cash.
- Network effects: Their network is very different (and much more powerful) from the Western union network. Western Union likes to say that we have the most locations in the world. But adding a new location to the network does not really add value to the existing locations. Here is why: There are lots of people sending money from the San Jose to cities in Mexico and there are lots of people sending money from San Jose to various cities in India. There is a large Mexican and Indian population in San Jose. But, there aren't that many people in Mexico sending money to India or vice versa. So a competitor can take out the San Jose to Mexico channel without having to disrupt the India channel. So arguably the Western Union network is a bit weaker in the sense that some legs can be taken out. In the MA/V case, you cannot do that. You carry a MA/V branded Chase debit/credit card because you know that if you go to Figi Islands, your MA/V branded card will be accepted by a mom-and-pop sandwich shop even if they don't know what Chase is.
- High P/E: What is the fair value of a business that is inflation protected (revenue goes up as global GDP goes up and transactions in nominal currency goes up)? It is like an inflation protected bond yielding 5%. i.e. 20x eps. MA/V is trading at a slight premium to this - 25x. I would say this is fair value but not overvalued.

Risk:
- Technological Disruption: I have written about this in my article about two-sided market. Apple seems to have gone in the direction of partnering with MA/V rather than bypassing them. There are emerging mobile person to person networks (in Africa) that have really taken off. So, there is some risk to this. But disrupting the global cross border transactions is very difficult.
- Legislation Risk: The risk here is real. Since the IPO, big box retailers along with the help of governments have gone after the networks. People put more weight on the technological risk, but this risk is much larger and more real.
Title: Re: MA - Mastercard
Post by: tengen on December 02, 2014, 02:36:50 PM
Great stuff. ^

Risk:
[...]
- Legislation Risk: The risk here is real. Since the IPO, big box retailers along with the help of governments have gone after the networks. People put more weight on the technological risk, but this risk is much larger and more real.

We've already seen legislation or threats to legislate caps to interchange fees, but wouldn't you say the majority of this risk is borne by the banks?
Title: Re: MA - Mastercard
Post by: jeyfox on August 04, 2015, 09:16:18 AM
Hi,
being a fan of the payments industry.
Here is a small follow up concerning Mastercard.
Revenus are not growing as quickly as Visa in the second quarter (7% for Mastercard versus 14% for Visa). Some explanation could be found in the fact that they are more aggressive as far as incentives are concerned. This is understandable as they are the challenger compared to Visa.

Compared to Visa, their structure is simpler (the European business is already part of Mastercard which is not the case for Visa).

Concerning valuation, we have a P/FCF of 27. For the FCF, I took 4,1 billion USD which more or less represents  a slight increase compared to the 2013 number. Maybe I am little too conservative. 2014 was impacted by an increase in the prepaid expenses. This number should come back to the level of the previous years (600 MUSD).

Cheers!
Jeremy
No hodlings in Visa and Mastercard.

Title: Re: MA - Mastercard
Post by: notorious546 on January 15, 2016, 12:29:03 PM
this might be a silly question.

Seems like management has decided to buy even more shares as they have performed well over the past few years. It would be interesting to see if they got more aggressively now that shares have corrected a little bit.

congrats to everyone who has held the stock until now.

from what i can see consensus numbers place the shares at a low 20x earnings multiple and mid 20x cash flow multiple. any color on how this has looked compared to historical levels? I'm getting more interested at today's levels.
Title: Re: MA - Mastercard
Post by: atbed on January 15, 2016, 01:52:45 PM
The average next twelve month (NTM) PE has been 20.6x since the IPO. It's been 23.3x the last three years.
Title: Re: MA - Mastercard
Post by: physcdisp on January 28, 2016, 06:57:47 AM
Mastercard has sold off a lot vs VISA.  Any folks here who know why this is the case.  MA was historically carried slightly higher multiple than V and now at current that has reversed.  Thanks
Title: Re: MA - Mastercard
Post by: fisch777 on January 28, 2016, 01:55:31 PM
Not sure, MA will soon have the real deal Visa, Inc. to compete with across Europe instead of a 3000-bank-owned consortium.

V/MA are two of the finest businesses on earth, arguing which one is better or which should have a higher multiple is not worth your time in my experience. 
Title: Re: MA - Mastercard
Post by: Liberty on January 29, 2016, 06:04:08 AM
Q4:

http://s2.q4cdn.com/242125233/files/doc_news/2016/4QFY15-Earnings-Press-Release.pdf

http://s2.q4cdn.com/242125233/files/doc_presentations/2016/4QFY15-Earnings-Presentation.pdf

http://s2.q4cdn.com/242125233/files/doc_financials/supplemental/2016/Supplemental-Operational-Performance-Data-2015Q4.pdf
Title: Re: MA - Mastercard
Post by: rishig on January 29, 2016, 07:11:09 AM
Q4:

http://s2.q4cdn.com/242125233/files/doc_news/2016/4QFY15-Earnings-Press-Release.pdf

http://s2.q4cdn.com/242125233/files/doc_presentations/2016/4QFY15-Earnings-Presentation.pdf

http://s2.q4cdn.com/242125233/files/doc_financials/supplemental/2016/Supplemental-Operational-Performance-Data-2015Q4.pdf

Thanks Liberty. I found the q call this morning to be pretty useless. Analysts are focused on trying to get their models right - all the questions are about the little changes that occurred in the numbers. This kind of minutiae does not help to judge how the competitive landscape is changing (or not changing). Overall, fx headwinds are a big problem, but that's a temporary issue imo.

Here is my 15 year spreadsheet with data from latest Q:
https://docs.google.com/spreadsheets/d/1YIdhJxUHy9CAP7xMa4gC3oYaxFmAUmkjPhqqxfeBXQc/edit?usp=sharing
Title: Re: MA - Mastercard
Post by: Liberty on January 29, 2016, 09:06:11 AM
Q4:

http://s2.q4cdn.com/242125233/files/doc_news/2016/4QFY15-Earnings-Press-Release.pdf

http://s2.q4cdn.com/242125233/files/doc_presentations/2016/4QFY15-Earnings-Presentation.pdf

http://s2.q4cdn.com/242125233/files/doc_financials/supplemental/2016/Supplemental-Operational-Performance-Data-2015Q4.pdf

Thanks Liberty. I found the q call this morning to be pretty useless. Analysts are focused on trying to get their models right - all the questions are about the little changes that occurred in the numbers. This kind of minutiae does not help to judge how the competitive landscape is changing (or not changing). Overall, fx headwinds are a big problem, but that's a temporary issue imo.

Here is my 15 year spreadsheet with data from latest Q:
https://docs.google.com/spreadsheets/d/1YIdhJxUHy9CAP7xMa4gC3oYaxFmAUmkjPhqqxfeBXQc/edit?usp=sharing

I share your frustration with analyst questions. I find that most of the conference calls that are worth listening to are those where management is in some way exceptional (often owner-operators) and brings up interesting things on their own (strategy, long-term, market structure, etc). Most of the analysts are just looking to fill in the holes in their Excel spreadsheets, though there are exceptions there too.

Thank you for sharing your data on MA, much appreciated.
Title: Re: MA - Mastercard
Post by: xtreeq on January 29, 2016, 09:32:30 AM
Thanks for the spreadsheet Rishi
Title: Re: MA - Mastercard
Post by: rishig on January 29, 2016, 09:33:00 AM
Q4:

http://s2.q4cdn.com/242125233/files/doc_news/2016/4QFY15-Earnings-Press-Release.pdf

http://s2.q4cdn.com/242125233/files/doc_presentations/2016/4QFY15-Earnings-Presentation.pdf

http://s2.q4cdn.com/242125233/files/doc_financials/supplemental/2016/Supplemental-Operational-Performance-Data-2015Q4.pdf

Thanks Liberty. I found the q call this morning to be pretty useless. Analysts are focused on trying to get their models right - all the questions are about the little changes that occurred in the numbers. This kind of minutiae does not help to judge how the competitive landscape is changing (or not changing). Overall, fx headwinds are a big problem, but that's a temporary issue imo.

Here is my 15 year spreadsheet with data from latest Q:
https://docs.google.com/spreadsheets/d/1YIdhJxUHy9CAP7xMa4gC3oYaxFmAUmkjPhqqxfeBXQc/edit?usp=sharing

I share your frustration with analyst questions. I find that most of the conference calls that are worth listening to are those where management is in some way exceptional (often owner-operators) and brings up interesting things on their own (strategy, long-term, market structure, etc). Most of the analysts are just looking to fill in the holes in their Excel spreadsheets, though there are exceptions there too.

Thank you for sharing your data on MA, much appreciated.

I wouldn't put MA management in this category. It seemed like they spent the entire hour on trying to baby sit the analysts, so they could get their projections right to double degree precision for 2016. It was the worst one hour I spent at 6:00 AM.
Title: Re: MA - Mastercard
Post by: Liberty on January 29, 2016, 09:58:31 AM
I wouldn't put MA management in this category. It seemed like they spent the entire hour on trying to baby sit the analysts, so they could get their projections right to double degree precision for 2016. It was the worst one hour I spent at 6:00 AM.

Yeah, I didn't mean to imply that MA management was like this. I was actually thinking of Mark Leonard at Constellation Software when I wrote this. His conference calls don't have any prepared remarks, he goes straight to questions. He doesn't take much BS and will readily admit when things are not working out or turning differently than he expected. He talks a lot about strategy, how his industry works, how he tries to create incentives within the company to accomplish certain things, what metrics are important to him, talks about long-term goals, etc. Same with his letters.

He's even stopped getting any compensation from the company and only benefits as a large shareholder.

If only all management was like this...
Title: Re: MA - Mastercard
Post by: Liberty on July 21, 2016, 06:51:40 AM
They're buying VocaLink for about a billion:

http://investor.mastercard.com/investor-relations/investor-news/press-release-details/2016/MasterCard-Announces-Acquisition-of-VocaLink/default.aspx

They had a call about it. Slide said EBITDA margins are 43%, but they said they expect to bring them north of 50%. Goal is international expansion, said think could get revenue growth close to MA levels. If that's the case, seems like the ±9x EBITDA multiple paid is pretty low.
Title: Re: MA - Mastercard
Post by: Liberty on July 28, 2016, 05:22:57 AM
Q2: http://investor.mastercard.com/investor-relations/investor-news/press-release-details/2016/MasterCard-Incorporated-Reports-Second-Quarter-2016-Financial-Results/default.aspx

Quote
The company reported net income of $983 million, an increase of 7% or 8% on a currency-neutral basis, and earnings per diluted share of $0.89, up 10% or 11% on a currency-neutral basis versus the year-ago period. Excluding special items related to separate U.K. merchant litigations taken in both this quarter and the previous year’s quarter, the company reported net income of $1.1 billion, an increase of 10% or 11% on a currency-neutral basis, and earnings per diluted share of $0.96, up 13% or 14% on a currency-neutral basis versus the year-ago period.

Net revenue for the second quarter of 2016 was $2.7 billion, a 13% increase versus the same period in 2015. On a currency-neutral basis, net revenue increased 14%. [...]

During the second quarter of 2016, MasterCard repurchased approximately 5 million shares of Class A common stock at a cost of $462 million. Quarter-to-date through July 21, the company did not repurchase any additional shares, which leaves $2.7 billion remaining under the current repurchase program authorization.
Title: Re: MA - Mastercard
Post by: TheAiGuy on August 27, 2016, 11:40:38 AM
Some links of interest:

http://www.wsj.com/articles/the-sinister-side-of-cash-1472137692
http://www.frbsf.org/cash/publications/fed-notes/2014/april/cash-consumer-spending-payment-diary

Title: Re: MA - Mastercard
Post by: Jurgis on August 27, 2016, 12:00:07 PM
http://www.wsj.com/articles/the-sinister-side-of-cash-1472137692

OT. I'm with libertarians on this: removing cash - even when people are talking about $100 note - is a stepping stone to police state. It is like war on drugs: removing just $100 won't work, so what's next? Removing $50 - already talked about in the same breath as removing $100. Then what? Removing $20? Banning cash?

We need NCA - National Cash Association. Government is coming for your cash. More important for freedom than your guns probably.  ::)
Title: Re: MA - Mastercard
Post by: TheAiGuy on August 27, 2016, 12:08:16 PM
We need NCA - National Cash Association. Government is coming for your cash. More important for freedom than your guns probably.  ::)

http://www.pennies.org
Title: Re: MA - Mastercard
Post by: Liberty on September 07, 2016, 12:52:38 PM
After Visa,

PayPal Strikes Deal with MasterCard to Allow Payments in Stores

http://www.wsj.com/articles/paypal-strikes-deal-with-mastercard-to-allow-payments-in-stores-1473154200
Title: Re: MA - Mastercard
Post by: Liberty on September 09, 2016, 05:23:08 AM
Mastercard sued for $19 billion in Britain's biggest damages claim

http://www.reuters.com/article/us-mastercard-lawsuit-britain-idUSKCN11E2S9
Title: Re: MA - Mastercard
Post by: oddballstocks on September 09, 2016, 05:51:15 AM
http://www.wsj.com/articles/the-sinister-side-of-cash-1472137692

OT. I'm with libertarians on this: removing cash - even when people are talking about $100 note - is a stepping stone to police state. It is like war on drugs: removing just $100 won't work, so what's next? Removing $50 - already talked about in the same breath as removing $100. Then what? Removing $20? Banning cash?

We need NCA - National Cash Association. Government is coming for your cash. More important for freedom than your guns probably.  ::)

Needed cash to buy an RV from a private seller.  I called the bank, they went into a panic.  They need a WEEK lead time to get cash.  I didn't have a week, they swung it anyways.  I was told that the branch rarely has much more than $10k on hand.  This is the busiest branch in the network for a $5b+ bank.  I had to deal with the manager, he said the bank sees cash as needed by used vehicle/thing purchasers and by those trying to hide income from the IRS.  He said government barely acknowledges that anyone would need cash for legitimate reasons.
Title: Re: MA - Mastercard
Post by: TheAiGuy on September 09, 2016, 06:12:13 AM
http://www.wsj.com/articles/the-sinister-side-of-cash-1472137692

OT. I'm with libertarians on this: removing cash - even when people are talking about $100 note - is a stepping stone to police state. It is like war on drugs: removing just $100 won't work, so what's next? Removing $50 - already talked about in the same breath as removing $100. Then what? Removing $20? Banning cash?

We need NCA - National Cash Association. Government is coming for your cash. More important for freedom than your guns probably.  ::)

Needed cash to buy an RV from a private seller.  I called the bank, they went into a panic.  They need a WEEK lead time to get cash.  I didn't have a week, they swung it anyways.  I was told that the branch rarely has much more than $10k on hand.  This is the busiest branch in the network for a $5b+ bank.  I had to deal with the manager, he said the bank sees cash as needed by used vehicle/thing purchasers and by those trying to hide income from the IRS.  He said government barely acknowledges that anyone would need cash for legitimate reasons.

I think you're overstating the overreaching government motive here. The point is that the use of a paper currency is less efficient than an electronic currency. There are far more steps, greater likelihood for loss, fewer economies of scale in managing the transactions, etc. The argument is that these factors will naturally drive most transactions to be electronic over time, even private sales of vehicles, and that the portion of large transactions that are illegal will grow overtime as legitimate transactions move electronic, giving regulators incentive to accelerate the transition to electronic payments.
Title: Re: MA - Mastercard
Post by: Liberty on May 02, 2017, 08:35:23 AM
MA Q1:

http://s2.q4cdn.com/242125233/files/doc_financials/2017/1Q17-MA-Earnings-Release.pdf

Quote
• First-quarter net income of $1.1 billion, or $1.00 per diluted share
• First-quarter adjusted net income of $1.1 billion, or $1.01 per adjusted diluted share • First-quarter net revenue increase of 12%, to $2.7 billion
• First-quarter adjusted gross dollar volume up 8% and purchase volume up 9%
• VocaLink acquisition completed
DEPS up 16%
Title: Re: MA - Mastercard
Post by: LongTermView on November 01, 2017, 09:15:20 AM
http://www.barrons.com/articles/why-mastercard-hasnt-been-disrupted-1509478859
Title: Re: MA - Mastercard
Post by: Liberty on November 01, 2017, 09:18:07 AM
Q3: http://s2.q4cdn.com/242125233/files/doc_financials/2017/Q3/3Q17-MA-Earnings-Release.pdf

Title: Re: MA - Mastercard
Post by: gary17 on February 06, 2018, 09:55:52 AM
Does anyone know if mobile payment apps like Wepay  and alipay and apple pay are direct competition of mastercard/visa?
Could mobile payment evolve to a point where it's just sending money /credit between buyer and seller and cut the credit card guys out completely?
TIA
Title: Re: MA - Mastercard
Post by: TheAiGuy on February 06, 2018, 10:35:11 AM
Does anyone know if mobile payment apps like Wepay  and alipay and apple pay are direct competition of mastercard/visa?
Could mobile payment evolve to a point where it's just sending money /credit between buyer and seller and cut the credit card guys out completely?
TIA

Generally speaking, payments exist in localities.  By that, I mean that there is a lot of variance in how payments are handed from place to place. Wepay/alipay don't really directly compete with visa/MA that much as off now (but they off course could in the future). This recent article about payments in Europe may be interesting to that regard https://t.co/CZs19LqlL4 (https://t.co/CZs19LqlL4)

Your second question is deeply speculative. Personally, I think it is unlikely that US consumers will start using Alipay or that Chinese consumers will start using Visa (domestically, in both cases).
Title: Re: MA - Mastercard
Post by: rist.tom on February 06, 2018, 10:43:25 AM
I was thinking the same thing....just watched a short WSJ video (https://www.youtube.com/watch?v=75AXINUL47g) this morning that showed how popular these apps are in China.  I bet the same is true for other high population developing areas like India, Indonesia, and parts of Africa.  They comprise around half (or more) of the world's population, so this would be a huge missed opportunity for V and MA. 

The only way I see this catching on the Western world is if merchants started offering small discounts for direct mobile payment (not something like Apple Pay where a credit card is still used).  If credit card fees average 3%, I could see a change in behavior if stores offered a 1 or 2% discount.  I live in Chicago, which implemented a 7 cent bag tax last year and it had a huge impact...bag use dropped by 45% in groceries. (source: https://www.dnainfo.com/chicago/20171020/lincoln-square/bag-tax-plastic-litter-grocery-shopping-revenue-paper).  Even though it doesn't affect most people's wealth, people like saving small amounts on purchases.

Title: Re: MA - Mastercard
Post by: TheAiGuy on February 06, 2018, 10:47:43 AM
(...) If credit card fees average 3%, I could see a change in behavior if stores offered a 1 or 2% discount.  (...)

This is a common misconception. The fee charged by V/MA is a small fraction of these fees, on the order of low double digit basis points. The lion's share of these fees are charged by your bank and the merchants bank.
Title: Re: MA - Mastercard
Post by: vinod1 on February 06, 2018, 11:02:26 AM
Both Visa and MasterCard have accumulated vast amounts of data over the years. They have historical data of all the places a card is used. They can provide in real-time (in milliseconds) fraud score on a transaction based on all this historical data whenever a card is being used. This significantly reduces fraud in the system. For example, if a person uses a gas station in a zip-code where they have never shopped before, Visa/MasterCard can flag this transaction for further verification.

In 2014, fraud losses globally amounted to $16 billion or about 5.65˘ for every $100 worth of transactions. In US, fraud losses are 12.75˘ for every $100. These losses are split roughly 60/40 between issuers and merchants. The fees charged by the card networks of around 10˘ compares favorably to these losses. So both issuers and merchants have an incentive to stay with card networks that can minimize fraud losses. Any new entrant would start with a much smaller dataset and fraud screening would be less effective and fraud costs higher. New entrants thus are at a disadvantage and need to absorb higher losses for several years and is disadvantaged relative to Visa and MasterCard.

Biometric identification with mobile payment devices has the potential to reduce these costs but V/MA have a huge lead.

Vinod
Title: Re: MA - Mastercard
Post by: Liberty on October 16, 2018, 11:49:10 AM
https://www.nytimes.com/2018/10/15/technology/visa-mastercard-amex-india-data-law.html

Quote
MUMBAI, India — When the clock struck midnight in Delhi at the end of Monday, Visa, Mastercard and American Express were suddenly in violation of the law every time an Indian swiped a credit or debit card.

They also became unwilling warriors in a budding conflict between America’s technology giants and the Indian government, which wants more control over the data they collect on India’s 1.3 billion residents.

The spark for the current fight is a new regulation, issued in April and in effect starting Tuesday, that requires payments companies to store all information about transactions involving Indians solely on computers in the country. The rule and the hubbub over it are part of a debate over a concept known as “data localization,” in which a country places restrictions on data as a way to gain better control over it and potentially curb the power of international companies. American firms have lobbied hard against data localization rules around the world.

In India, Visa, Mastercard and American Express, as well as other financial players like Amazon and PayPal, said they needed more time to comply with the order by the country’s banking regulator, the Reserve Bank of India.
Title: Re: MA - Mastercard
Post by: Liberty on October 30, 2018, 12:18:36 PM
Q3: https://s2.q4cdn.com/242125233/files/doc_financials/2018/Q3/3Q18-Earnings-Presentation.pdf

Quote
• Record third-quarter net income of $1.9 billion, or $1.82 per diluted share
• Record third-quarter adjusted net income of $1.9 billion, or $1.78 per adjusted diluted share
• Record third-quarter net revenue of $3.9 billion, or an increase of 15%
• Third-quarter gross dollar volume up 13% and purchase volume up 15%

EPS up 36% FX-neutral.
Title: Re: MA - Mastercard
Post by: Liberty on January 22, 2019, 06:12:22 AM
http://europa.eu/rapid/press-release_IP-19-582_en.htm

Quote
EU fines Mastercard €570 million for obstructing merchants' access to cross-border card payment services
Title: Re: MA - Mastercard
Post by: Own The Rails on January 22, 2019, 03:12:18 PM
http://europa.eu/rapid/press-release_IP-19-582_en.htm

Quote
EU fines Mastercard €570 million for obstructing merchants' access to cross-border card payment services

In December, Mastercard had disclosed that they were anticipating a 1Q19 resolution to the EC’s investigation into their historic central acquiring rules, so this news is nothing more than confirmation of the exact Euro amount. Historically, Mastercard had unique rules for the EEA regarding acquiring that required the interchange fee applicable to a transaction be driven by the domestic market rates at the location of the merchant, regardless of whether that merchant processed through an acquirer in another jurisdiction. Merchants in Europe often choose to process through an acquirer in a lower-cost jurisdiction to optimize processing costs. Late in 2015, Mastercard modified this rule to comply with new requirements for operating within the EEA. Mastercard had anticipated taking a roughly $650mn charge in 4Q18 in relation to this anticipated settlement, which has now been officially set at €570mn or $648mn, well below the $1bn or greater number it had been citing in previous filings as a possibility.

Both MA and V have flawlessly navigated previous litigation, so there is no real reason to think this is any different, especially since MA no longer adheres to the practices it is being fined for.
Title: Re: MA - Mastercard
Post by: John Hjorth on August 07, 2019, 01:09:17 AM
Mastercard News Release [August 6th 2019] : Mastercard Advances Its Leadership Position as a Multi-Rail Payments Company with the Acquisition of Nets’ Account-to-Account Payment Business (https://newsroom.mastercard.com/press-releases/mastercard-advances-its-leadership-position-as-a-multi-rail-payments-company-with-the-acquisition-of-nets-account-to-account-payment-business/).

From a local Danish perspective, this is really big. Among the systems [including customers] included in this deal is a system, in Danish called "Betalingsservice" [translates to "Payment Service" in English].

I suppose it is one of the most important systems in the Danish financial infrastructure, in line with the Danish central bank's Cognos2, the properitary systems at Danske Bank and Nordea and the systems at the three bank owned datacenters that provide technical infrastructure to all other Danish banks.

It's fully integrated with all five Danish e-banking platforms, where you as consumer can manage all your payment agreements without involvement of any person at the bank. Around the 25th in every month the user receives an overview with all details & specifications of payments next month in the citizen's digital inbox in the cloud [called E-boks], and in e-banking the specification is integrated in module "future payments". It's just a breeze.

My guess is that more than 95 percent of Danish households use this system. This system has taken care of all my fixed costs since I left the nest. Today, it handles and processes all payments in our household, less two exemptions : Our dentist bills [our dentist(s) [same practice for us though] does not use the system] and the monthly payments on the primary card used by the Lady of the House [because it's optional for her if she will pay the full balance or roll some of it over to next month, which she never does].

Every Danish residential real estate owner or manager with just some decent self-respect uses the system to charge and collect rent, to pay fixed & recurring property costs and mortgage payments, with full integration in their tailored ERP-systems.

- - - o 0 o - - -

If something similar does not exist elsewhere, this really has business potential elsewhere for M.

- - - o 0 o - - -

I wonder what is left of Nets after this transaction.
Title: Re: MA - Mastercard
Post by: Liberty on February 25, 2020, 05:37:09 AM
New CEO:

https://www.cnbc.com/2020/02/25/mastercard-names-product-chief-michael-miebach-as-ceo-ajay-banga-moves-to-executive-chairman.html