mastercard is up more than 8,000% since it came public in 2006.
it has literally been one of the best stocks that you could have buy and hold over the last
15 years but does this financial giant still have a bright future ahead let's run it through
our investing frameworks to find out my name is Brian Feroldi and my name is Brian Stoffel
thanks to stockcard.io for sponsoring today's video okay brian i have a feeling
that at this point almost everyone watching this video probably has the mastercard logo
somewhere in their wallet but the business is more complicated than we might think what
does mastercard do mastercard operates one of the largest payment processing networks in the world
mastercard acts as a key middleman between merchants aka businesses with stuff to sell
and consumers who are purchasing those products and mastercard ensures that payments happen
swiftly and easily between those two entities importantly mastercard has nothing to do with
lending money it is just processing the payments and brian we also want to point
out that mastercard has been doing this for a really long time and it's gathered a bunch of data
the companies decided to take that data and offer subscription products to merchants and banks to
help them make better decisions things like cyber security and identity verification or even tools
to help certain industries like travel and tourism and that is a strong sign of optionality a big
chunk of it comes from processing payments in the united states and also from cross-border payments
that's when you live in one country and spend in another another important category for this
company is what it calls other revenue which is those other business units that brian just covered
that's becoming a significant growth driver for this business all right brian let's take it to
the anti-fragile framework what do you think of mastercard's mission statement to connect
everyone to priceless possibilities it's difficult because i don't necessarily think that's simple
it's kind of inspirational maybe optionable but i just think they could do a lot better totally
agree with you there i'm giving this company a middle of the road grade on mission statement
moving on to the moat category do you think mastercard benefits from the network effect
absolutely this is the most important moat that the companies had from the very beginning as more
merchants accept mastercard the more people want to use it and as more people want to use it more
merchants want to make sure that they accept it mastercard's network is one of the best reasons
to own this company its network gets bigger and better every year do we think that mastercard
also benefits from switching costs i do i think that banks who have a bunch of customers set up
using this are load to switch and individuals who have a credit card that's connected to all
the different things that they have to pay in a monthly basis they don't want to go through
the hassle of switching either so i think that there are also very high switching costs involved
ask yourself when's the last time you opened up a new credit card or switched bank account yes
that is one big benefit of the banking industry is the switching costs tend to be high do you think
mastercard benefits from a low cost advantage none that i'm going to give them credit for
i agree with you there i would give them credit if they were the only payment processing network in
town but there's another company out there called visa that also processes payments at a pretty low
price how about intangibles any brand value or patents at play here absolutely this is a duopoly
between visa and mastercard and everybody knows mastercard so i think they definitely benefit
from brand value although spending on those priceless commercials i think have paid off too
finally do you think that this company benefits from counter positioning i think that the company
did back when it was founded but it doesn't anymore totally agree with you there overall
though i think that mastercard clearly has built itself a wide moat moving on to optionality do you
think mastercard has the ability to open up new revenue opportunities by creating new products and
services absolutely we've already touched on this a little bit but for most of the company's history
a payment processor was its main role but they have all the services that we've talked about and
they're looking to embrace new networks like open banking digital identity and even cryptocurrency
all those categories are potential growth avenues for this company and that other revenue segment is
actually starting to become a meaningful growth driver for this business so i totally agree that
this company does have optionality moving on to the financial statements as of september
30th this company has 6.9 billion dollars in cash 13.2 billion dollars in debt and nearly 8 billion
dollars in free cash flow over the trailing 12 months what do you think of these numbers
in general i think they're very strong now to be fair for consistency's sake i don't love seeing
when a company has almost twice as much debt as it does cash on hand at the same time the free
cash flow is so big that it's not that much of a concern like you i prefer to invest in companies
with more cash than debt in this case i'm not at all worried about this company's financial
health it is incredibly strong financially any concentration risk that investors need to be aware
of none to worry about great moving on to skin of the game category what do we see on glassdoor we
see very good reviews especially for such a large company 4.2 stars and a 94 approval rating this
is high quality yeah it's clear that mastercard is a great place to work which is awesome to see how
about the founder is the founder still involved in no way really whatsoever but that's because
mastercard was formed in the 1960s by a group of regional banks in response to bank of america
coming out with really the first popular credit card which later became visa so it's hard to ding
them because there was never a founder in the first place but for consistency's sake we're
not going to give them any credit for having a founder still involved all right ownership
is the executive team here have any skin in the game on that front they do have some skin in the
game again because there is no technical founders it's very low it's below a half of a percent at
the same time the small percentage is still worth over 1 billion as of this filming the question i
always ask myself is do insiders have a meaningful amount of their personal net worth in the game i
think the answer there is yes but like you said for consistency it doesn't meet your thresholds
before i move on to the final score we want to give a shout out to our channel members thank
you so much for choosing to join doing so gives you access to badges and emojis and importantly
gets you access to special member-only voting on what stock brian and i researched from scratch on
this channel next if that interests you click the join button all right brian let's take it from the
top what'd you give mastercard for mission i gave them a half a point again i wasn't very impressed
with it fair enough how about moving on to moat so i gave them full credit two points for the network
effect full credit two points for switching costs and full one point per brand giving it a total of
five really good moat score how about optionality i gave them two out of three and to be honest i
might be a little bit stingy there so if you think i am you could bump that up to a two and a half
still a good score overall moving on to financial fortitude what did you give them on financials
i gave them a half point mainly because i don't love seeing all that debt at the same time so
much free cash flow coming in means that we shouldn't worry about that too much yeah this
company is incredibly strong financially in my opinion i am not worried about that debt at all
concentration any points off nothing to worry about great moving on to glassdoor what scored you
give them i gave them full credit they got great scores great how about for the founder i gave them
nothing which we talked about is not really their fault but founder's not involved hard to really
ding them there but for consistency we're going to how about on the ownership side now there i
took a point off again that's because this is an older company formed in the 60s no founders
at the same time less than one percent of shares are owned by insiders sounds harsh but if you add
all that together this company gets an eight which is in your robust category correct and
again mastercard's not the perfect company for the anti-fragile framework but it is still
investable great now let's take it through my investing framework on the financial side
i gave this company a 16 out of 17. i basically took one point off because of the high debt load
for moat i gave the company a full score of 20. i think the company's mode is incredibly wide and
getting wider each year for potential i only gave the company a 12 out of 18. one reason why is this
company is already so unbelievably profitable that i don't think there's any operating leverage ahead
moreover its size is going to lower its top-line growth rate but still i think there's plenty room
for this company to grow customer quality i gave it a 10 out of 10. i love the relationship this
company has with its customers revenue quality 10 out of 10 not only is it high margin it's
also recession proof and recurring management and culture i only gave it a 7 out of 14 here the ceo
is relatively new and like you said there wasn't a ton of skin in the game and i'm also not all
that thrilled about the mission statement for the stock category i gave it full credit not only has
the stock thumped the market not only does the company regularly beat its earnings estimates
but the company also uses its free cash flow to reward shareholders with a rising dividend and
buying back huge amounts of stock on the gauntlet i actually subtracted seven points the reasons for
i think that this company has anti-trust concerns i think that there's also an existential threat
in the long term from cryptocurrencies and it gets the bulk of its revenue outside of the
united states so i was actually pretty harsh on the gauntlet here even after factoring all that
together though this company got a 78 on my quality score which is a very very high score
i think this company is highly investable and this is a company that i have personally owned
for years and while mastercard's not a stock that i own it is still clearly investable for
i'm gonna head on over to stockcard.io to hold ourselves accountable i'm starting
out in the anti-fragile portfolio and i'm going to add a new order the ticker symbol
here is m a i'm going to do a buy decision on it today's date is monday november 15th
it is a 363 dollar stock i'm gonna buy three shares and the score for you was eight
which is the brian for all the quality checklist and i'm going to do the same thing
stockcard.io and see which companies have scored in our investable range but we also
encourage people to start an account with stock card and open up your own portfolio
it is a great way to learn learn about what works what doesn't and hold yourself accountable
and when you're signing up don't forget to use the code anti-fragile for a discount
all right brian another great company in the books brian's out