YouSaid · the spoken record

Sean Stannard-Stockton

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53

first

2020-02-09

most recent

2020-02-09

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1

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podcast

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1. “MasterCards like the diametric opposite. So over the last couple years, they've been investing very aggressively in other companies in the payment industry to do things like crack open enormous markets such as business-to-business payments. So most businesses today still mail checks back and forth. They do wire transfers at $25 a pop. The infrastructure on payments for businesses is not very robust. And so MasterCard's been investing heavily, as has Visa in building out into those areas, as well as staying on the cutting edge of technology. And so when you think about their operating expenses, despite the fact that profit margins have jumped 10%, at the same time, we think that the operating expenses in the business today are not needed to sustain the business. In other words, it's investment that's running through their income statement. And so we think a cleaner kind of understanding is that their profit margins are even above 57% and then they're reinvesting a fair bit to continue growing.”

   2020-02-09 · We Study Billionaires · TIP281: Intrinsic Value Assessment of Mastercard w/ Sean Stannard-Stockton (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT

2. “MasterCard just has an amazing business model. I mean, if you could design a kind of set of financials, this is what you'd want to see, right? So over the last decade, revenue's grown 330% or about 13% per year. Their operating expenses have grown just 270% or about 10% a year. And this profit margins to rise from an already incredible 47% to an amazing 57% operating margin growth. And we think that those numbers actually understate the earnings power of this business. And that's because MasterCard, along with Visa, has basically owned payments in the developed world. But rather than just kind of sit on that and kind of milk that for cash flow, like a lot of kind of legacy incumbent businesses that have deep competitive advantages, they get lazy, right? And they stop investing for growth.”

   2020-02-09 · We Study Billionaires · TIP281: Intrinsic Value Assessment of Mastercard w/ Sean Stannard-Stockton (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT

3. “Thanks so much. Yeah, we've owned MasterCard for almost a decade at this point. You might think about MasterCard and First Republic that I spoke about last time and think, oh, they're both financials. You know, these guys are into financial stocks. But actually most financials we don't think are terribly interesting. First public's kind of a unique business model. But MasterCard, I think it's important to recognize that it's just not a financial. I mean, this is not a business that lends any money, which most people say, what are you talking about? It's a credit card company. So I'll walk through all of that. I will say kind of at the outset, we do think MasterCard is a compelling stock to own, to buy at these prices. The stock is up over 20% since I agreed to come on the show. And we think the valuation is closer to fair now. But some people might look at it and think it's expensive, which we think is wrong. And so when we get into that later in the show, we'll kind of dig into how we think about this sort of business. But at the outset, it's important to recognize that.”

   2020-02-09 · We Study Billionaires · TIP281: Intrinsic Value Assessment of Mastercard w/ Sean Stannard-Stockton (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT