Lessons learned from Visa and Mastercard in a year of crypto news

In this podcast, Jason Moser, Senior Analyst at The Motley Fool, said:

• How visa When master Card We were transported into a year dominated by crypto news.
• Why a fortress-like balance sheet will be an even bigger asset in the new year.
• A leader he has his eye on in 2023.

To watch full episodes of all free podcasts from The Motley Fool, check out our Podcast Center. To get started, check out our Stock Investing Quick Start Guide. Full transcript follows the video.

This video was recorded on December 28, 2022.

Chris Hill: A wise man once said: The Motley Fool Money begins. Today, I’m Jason Moser, Senior Analyst at The Motley Fool. Thank you for being here.

Jason Moser: I am happy to be here. Thank you for inviting me.

Chris Hill: I wanted to chat with you because you tweeted a few weeks ago. I think we were discussing this just before we started recording, so let me set this up for anyone listening. A few weeks ago you just tweeted a photo of an article he did on TechCrunch a year ago. It was December 31, 2021 and the headlines were billionaire’s Chamath Palihapitiya, with Visa and Mastercard saying he would be the biggest business failure of 2022, losing out to an altcoin-related project. I’m here.

As we have this conversation, Visa and Mastercard are both down nearly 7% year-to-date, outperforming both stocks by about 8%. The point is not to single out Chamath and say this man was wrong. Talking about the part of disruption that doesn’t get a lot of attention. It’s a question of when a company says it’s going to disrupt the industry. I feel like I haven’t talked enough about this question, how do you think the companies you’re trying to disrupt will react?

Jason Moser: yes. That’s a really good point. It didn’t tweet it to single out Chamath so much. It can be taken from what I presume. But in particular it caught my eye for a number of reasons and felt clickbait to some degree. I believe that a business worthy of itself is always focused on competition for the markets it serves, on the dynamics of competition. Within that market, a threat that could go down the pike, it’s a business worth doing in itself.

It would be naive or naive to think that Mastercard and Visa are not doing that. I don’t call him naive or ignorant, but he may have been told before he thought. You’ll soon find out that it’s not a simple business. Looking at Visa’s fiscal year 2022, they made $11.6 trillion in payments, they processed his 192.5 billion transactions. If you look at Mastercard, $7.7 trillion, $112.1 billion in transactions, it’s not a business that can be easily confused. I’m not saying it can’t be done. I think it would be a hindrance to any business.

But we also have to consider the fact that companies like these regardless of their crypto position. Generally speaking, I’m skeptical, but I wouldn’t invest in that area. But they’ve certainly invested in that space, understanding how it’s evolving and that it could potentially be a threat and potentially an opportunity. I think these types of businesses need to make sure they understand that they absolutely see a competitive threat. I think you are.

Chris Hill: Expanding beyond the financial industry seems to be partly because we are starting a new year. Whether it’s our personal health, the news cycle, or finance, I think it’s natural for us to start January with essentially fresh eyes. When you look through the lens, you can see big companies with balance sheets like fortresses. microsoft When apple When alphabetI don’t know what will happen to the stock market in 2023. I’m generally optimistic, but these companies seem to be in a better position than anyone else. Behemoth seems to be in better shape. They are not without their challenges. It’s not that they aren’t dealing with the same macroeconomic conditions as the rest of us. But a strong balance sheet provides a sense of security that small start-ups that rely heavily on a low-interest-rate environment do not.

Jason Moser: one hundred percent. Much like our personal finances, having a solid balance sheet makes every day a lot easier and a lot less stressful. It makes them think completely differently. i totally agree with that. I would also like to include businesses such as Mastercard and Visa in that conversation. I don’t know what this year will bring for the stock market, but I’m fairly certain that tailwinds continue to develop for cashless transactions in the digital movement of cash. It means people spend money. Money has to go from point A to point B.

That doesn’t change either. Look at these businesses that have made their mark by managing their business smartly or by owning products and services that people really need. look at apple what we do on a daily basis. Apple doesn’t own the smartphone market, but it certainly controls most of it. I think it would be a tall order to destroy an iPhone. Nothing is going to happen anytime soon. This has been a topic of discussion recently, but home depot When Lowes.

Home improvements will always be there. If there is this large installed base of housing that we have here in the country, it must be maintained. Looking through the lens of a year, these are the businesses that I truly feel can be owned indefinitely and the businesses that I try to hold indefinitely and of course I assess the state of the business each year. But make sure it doesn’t erode the potential these businesses have. But for me, who owns huge businesses, this has been a great year of owning them. Let’s take a look back at Visa and Mastercard’s performance.

Mastercard’s year-to-date performance was down 4.9%. Visa has fallen 5.3% to the market since the beginning of the year and is now down 19.8%. To me, owning these types of businesses makes investing much easier. I would say that investing is easy or as hard as you want it to be. It’s pretty simple when you think about it. It doesn’t take long. I think just owning a business like this would make a big difference in the world. Not only is it much easier for investors to get through the rough times of owning this kind of business, but it also involves smaller, worst-case speculative ideas that can probably be a little less certainty.

Chris Hill: We will have a full preview for 2023 later in the week. Jason Moser, it’s always great to have a conversation with you. Thank you for being here.

Jason Moser: Thank you very much.

Chris Hill: As always, those participating in the program may be interested in the stocks they’re talking about, and the Motley Fool may have formal endorsements for or against them. So don’t buy or sell stocks based solely on what you hear. I’m Chris Hill. Thank you for listening. See you tomorrow.