Should I Buy Shares of Mastercard or Visa?

Oct 25, 2011
J. Webster
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Should you buy shares of Mastercard (MA) or Visa (VO)? Well, on one hand you have Warren Buffet buying up shares of Mastercard. That’s an impressive reason enough to buy Mastercard right there. This past March, based on his filing with the SEC, Buffett showed he owned 216,000 shares of MasterCard’s stock. And Buffett isn’t a fly by night stock trader, he is of course a very long term investor, almost to the point of building large positions and never selling shares stocks he likes.

Visa though is no slouch. While it doesn’t have a whale like Buffett buying up shares of its stock, it’s brand is perhaps stronger than Mastercard. Everywhere you look you’ll see the little Visa sign in the bottom right corner. They sponsor more sporting evens and competitions they anyone else. Their brand is like gold.

What’s glorious about both Mastercard and Visa is they don’t take on the risk of loaning people money. Rather, they’re paid for each transaction. And this is only going to grow as emerging markets become stronger and enable more people to spend money with plastic – think China, Brazil, and India. Just the electronic transaction itself is growing too. Why use paper when you can use your card? The cashless society is a very real and more and more evident around the globe.

One stock costs $330, Mastercard. One is a $90 stock, Visa. Neither really have dividends to write home about. Visa is a much larger company, with a market cap of $75 billion. Mastercard has a market cap of almost half that, at around $42 billion.

So, while Visa, with 816.94M shares jumps around a few points a day. Mastercard, with just 127.06M shares, might move 5 or ten points a day. The question becomes how much capital to you want to deploy when you’re buying one of these credit card companies. Either way though, you’re still buying a global processing company that earns money whenever someone makes a purchase. And in all likelihood, both stocks will split at some point in the coming years.

Perhaps the answer to whether you should buy shares of Mastercard or Visa is just to flip a coin. They’re both so good for the long term.

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