Saul: V & MA?


Have you considered investing in VISA and MasterCard, the two major credit cards? Why or why not? I’m tempted.

Denny Schlesinger


There was a recent article on SA that compares the major credit card firms:…

Interesting analysis and I tend to agree with the author that the valuations are difficult to stomach at the moment.


Have you considered investing in VISA and MasterCard, the two major credit cards? Why or why not? I’m tempted.

Hi Denny, I took a starter position in MA for a short time when it was recommended by a paid service, but I think I decided that growth was too slow for the high price of the stock. That’s just my memory though.


Thank Sameer, very helpful!

Denny Schlesinger

The average share price growth rate for the past five years have been 36.8% for Visa and 38.3% for MasterCard (using the best fit line method). By comparison, the S&P 500 has a growth rate of 14.1% and the NASDAQ 16.5%.

The P/E ratio for both is around 30. By comparison, the S&P 500 has a P/E of 18.9 P/E. If they can keep the growth up, neither is expensive.

Denny Schlesinger


I’ve had MA for several years, but I consider V a very good business too. I like those toll takers.



MA is currently my largest holding in my modest portfolio. I love their CEO Ajay Banga. He has a way of thinking outside the box and is extremely proactive when it comes to pairing the MA payment highway with any and all technological mediums available. In fact, Banga preaches this “technology agnostic” philosophy often. From their 2015 Q1 conference call:

You’ve probably heard us talk about the fact that we are technology agnostic when it comes to mobile and digital payments, and we are determined to support implementations based on different market models.

This proactive philosophy to integrate MA’s platform with any and all mediums often leads them to capturing emerging markets before their competitors. For instance, they have a deal with the Egyptian government to link Egyptians’ national ID card with a national mobile wallet. Other recent deals include partnerships with the Bank of Ireland, a mobile platform for the Commonwealth Bank of Australia, and the First Bank of Nigeria.

Oh, and don’t forget about their headstart over V in China!…

I believe these investments will fuel international growth for MA for a long time and makes it a superior investment to V right now. I do believe digital payment platforms like Paypal and things like Bitcoin pose possible future threats and should be watched. Just my thought process on these investments.

  • Matt

Thanks Matt, very helpful. I always thought of VISA as the senior card but maybe it’s time to reset that thinking. Of the several cards I’ve had over the years, VISA/AA Advantage has always been the most user friendly.

Denny Schlesinger

You know, Denny, the only two cards I ever use are AmEx and V because of the different rewards they offer. This fact actually made me pause before investing in MA.

But as I researched I found there were a slew of cards available for a variety of different needs and some cards are just better suited for different people than others. For instance, some are good for people with low credit scores, others offer lower interest rates, and others just offer different types of rewards that are going to appeal differently to people. A lot of people just have cards because their favorite place to shop has partnered with a card or because its simply the card their bank offered.

Domestically, that stuff seems to just ebb and flow. For instance, next year AmEx is being replaced by V as Costco’s sponsored card. After V’s contract is up with Costco, would anyone raise an eyebrow if AmEx or MA swept in and replaced it? No. And the same goes for the different airlines, hotel chains, etc.

But the US market is already saturated. As I see it, the real growth for all the major players in electronic payment processing will happen in international markets and different technological mediums. And this is where I think MA holds an edge.

Don’t get me wrong though, I suspect MA, V, and AmEx will be market-beating picks over the next five years.

Again, this is just my humble opinion.

  • Matt

I always thought of VISA as the senior card

I remember when I was in college (mid 80’s) and wanting to get my first credit card. I was thinking of Visa because I’d seen it around more, but my parents advised me to go with MasterCard because it was much better established outside the U.S. Within the next couple of years, Visa launched the “It’s Everywhere You Want To Be” ad campaign and they seemed to start dominating in the U.S. (in terms of the number of retailers that took Visa vs. MasterCard).

My first card was through USAA, an insurance and financial services company for active and retired military, and their dependents. For the longest time, all they offered was MasterCard. It was relatively recently that they added Visa as a choice.

Now it seems like any store that takes one, takes both. When my wife ran a retail store, I know that processing of Visa and MasterCard transactions came as a bundle, and Discover or AMEX were extra cost.



I own both. MasterCard is fairly new but I’ve had Visa long enough for it to be almost a 3 bagger. I think MasterCard will continue to grow faster and they seem more aggressive about international expansion. However, there’s room in a diversified portfolio for a stable company like Visa that continues to increase its dividend.

Barriers to entry are sky high, so future competition is limited. It’s frequently quoted that 75% of the world still runs on cash, so there is literally a globe of expansion opportunity. With billions of potential cardholders, that’s more than enough for both companies to get their share.

I’m not sure why this one is always framed as a competition. I say go with both.

long on V & MA