MasterCard, Inc. (MA)
A global payment solutions company that provides various services in support of the credit, debit & related payment programs to financial institutes. Also develops & markets payment solutions, process payment transactions & provide consulting services.
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Once the investment markets realize how bloated the pricing of this stock is, it should drop by around 50%.
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Economy is starting to tick upward as will credit card purchases.
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a good stock
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> Overpriced, has to come down
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I am going to do a Cross Sectional Analysis on five of the largest credit card companies, analyze the risk involved with the industry and determine on a relative basis which stock is undervalued. The companies I am evaluating are Discover Financial, American Express, Visa, Capital One and MasterCard…
Read the report at
http://stocklook.blogspot.com/
Or after Wednesday, October 28
http://stocklook.blogspot.com/2009/10/credit-card-stocks-dfs-axp-v-cof-and-ma.html
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The market's overconfidence has supported many financial stocks, including ones where growing unemployment and higher taxes will hurt revenue. At some point over this next year, the stock price will better reflect this risk and the lower expected profits.
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MasterCard looks a little expensive at 36 x reported earnings. That fact coupled with the weakening macro-economics in the US suggest that transaction volumes will be dropping over the next few quarters (maybe longer). Also I am already starting to hear some convincing rumblings about a possibly weak Christmas retail season (see David Rosenberg of Gluskin+Sheff). Look to Q4 earnings in early 2010 to be a make or break report for MA.
I have not done nearly enough due diligence on MasterCard to make a definitive call but the negative factors I have referenced above, coupled with the fact that I believe Visa and MasterCard are more tied to the macro-economy than some other firms gives me confidence in making an underperfrom call in CAPS.
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I set a screen with the following: Greater than 15% 13 week price change, $10 cash per share or more, greater than 15% institutional ownership, and EPS of $5 or more. The idea was to look for companies that are in acquisition mode (or targets thereof).
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This account tracks the performance of the investment firm Ruane, Cunniff, and Goldfarb - the investment manager of Sequoia Fund.
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MA will benefit from the megatrend of increased usage of debit cards. MA makes money from transaction fees each time the card is used. They do not carry the credit. In 2010 the EU is slated to end the oligopoly of government credit cards which will open the European market to MA and V. MA increased their revenue in the 2nd quarter of '09. Few companies were able to achieve that. MA is also projecting big increases in 2nd half '09 income v prior year.
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Transactions are not growing. Stock is overextended.
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Short Squeeze.
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Electronic transactions will continue to grow. I don't see banks or other companies innovating in this arena. Look for Visa and MasterCard to grow consistently year after year.
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Very similar model to Visa. I purchased Visa a little early so this looks like a good entry point for MA.
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With tougher credit card approval rates and Obama's new credit card law on people ages 18-20, it will be highly unlikely to have skyrocket growth as it did 2 years ago. Its price is too high and overvalued to spur a comeback in the current market frame of a year.
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Fortune 40
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Bearish on entire industry
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Medium growth profitable market share leader at reasonable price.

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