In this podcast, Motley Fool Senior Analyst Jason Moser comments:
- How Visa Y MasterCard It fared in a year dominated by crypto news.
- Why strength balance sheets will be an even greater asset in the new year.
- Leaders you are watching in 2023.
To watch full episodes of all of The Motley Fool's free podcasts, check out our podcast hub. To start investing, take a look at our quick start guide to investing in stocks. A full transcript follows the video.
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This video was recorded on December 28, 2022.
Chris Hill: A wise man once said, when you come to the king, you better not fail. Motley Fool Money starts now. I'm Chris Hill, joining me today is Motley Fool Senior Analyst Jason Moser. Thanks for being here.
Jason Moser: Happy to be here. Thanks for inviting me.
Chris Hill: I wanted to talk to you in part because of something you tweeted a few weeks ago. Let me set this up for people listening because I think we were talking about this right before we started recording. I think we are at a very interesting time for stock investors. A few weeks ago, you tweeted an image from a story that TechCrunch did almost exactly a year ago. It was December 31, 2021 and the headline was that billionaire Chamath Palihapitiya says that Visa and Mastercard will be the biggest business failures in 2022 losing to altcoin-linked projects.
As we're having this conversation, Visa and Mastercard are down about seven percent year to date, which makes both stocks, call it eight percentage points better than the overall market. The point is not to point to Chamath and say, this guy screwed up. It's really to talk about the part of disruption that doesn't get as much attention. It's this question of when companies say they're going to disrupt an industry. I feel like we don't talk enough about the question, how do you think the companies you're trying to disrupt will react?
Jason Moser: Yes. That's a very good point. That didn't tweet that to single out Chamath as much. He has a penchant for making hyperbolic statements like that. That can be taken from what it is, I suppose. But that, in particular, stood out to me for a number of reasons and it feels like clickbaity to a degree. But I think when you look at a new market like cryptocurrency projects and Altcoin and then look at these businesses and Mastercard and Visa, any worthwhile business is going to constantly focus on their competition around the market they serve, the competitive dynamics. within that market, the threats that might be coming down, that's just any worthwhile business is going to do that.
To think that Mastercard and Visa are not doing that is naive or just plain ignorant. I'm not calling you naive or ignorant, but you may have spoken before you thought. Just look at some of the numbers here regarding Mastercard and Visa and you can quickly see that these are not businesses that will be easily disrupted. If you look at fiscal year 2022 for Visa, they did $11.6 trillion in payment volume. They processed 192.5 billion transactions. You look at Mastercard and it's more of the same gross dollar volume of $7.7 trillion, transactions of $112.1 billion, these are not businesses that are going to be disrupted easily. I'm not saying they can't be, they certainly can be. I think any business would be disrupted.
But you also have to consider the fact that businesses like these, regardless of your position in crypto. I think generally speaking I would call myself skeptical, I'm not really looking to invest in that space. But they're certainly making investments in that space to make sure they understand how it's evolving and how it could be a threat as well as an opportunity. I think, for me, you have to make sure you understand with these types of companies that they're absolutely looking at competitive threats and I think they're constantly evaluating that landscape.
Chris Hill: Expanding beyond the financial industry, it really seems partly because we're starting a new year. I think it's natural for us, whether it's with our personal health or the news cycle or finances or whatever, to start January with essentially a fresh look. When I look through that lens, I see great companies with balance sheets of strength like Microsoft Y Apple Y Alphabet. I don't think I know what's going to happen in the stock market in 2023. Overall, I'm optimistic, but those companies seem to be in a better position than anyone else. The Giants appear to be in better shape. It's not that they don't have challenges. It's not that they're not dealing with the same macroeconomic conditions as everyone else. It's just that when you have a balance sheet of strength, it gives you peace of mind that smaller startups that are more reliant on a low interest rate environment don't have.
Jason Moser: Hundred percent. Just like our personal finances, having a rock-solid balance sheet can make days so much easier and take a lot of stress off of you. Companies that are putting themselves in this position as well. It puts them in a completely different mindset. I totally agree with that. Businesses like Mastercard and Visa, I would include in that conversation. I also don't know what the year will bring for the stock market, but I'm pretty sure the tailwinds continued to develop in cashless transactions in the digital movement of money, I think those tailwinds will continue to grow in that people are going to spend money. The money has to go from point A to point B.
That's not going to change either. Look at these companies that have put themselves in a position of either just running the business smart or just owning a product or a service that people really can't do without, look at Apple, I think smartphones are the lifeblood of much of what we do on a daily basis. While Apple doesn't own the smartphone market, they certainly control a large part of it. I think that discontinuing the iPhone will be a difficult task. It's not something that's going to happen anytime soon. This is what we've talked about recently as well, house deposit Y Lowe's.
Home improvement will be something that will be around all the time. When you have this huge installed base of homes that we have here nationally, those things have to be maintained. Now looking through the lens of a year, these are businesses that I feel like you can own indefinitely, I really feel like these are businesses that you want to try to hold on to indefinitely, and of course you assess the state of the business every year. Make sure those competitive forces aren't eroding the potential these businesses hold. But for me, owning these kinds of gigantic businesses, this was a great year to own them. Look back at how Visa and Mastercard performed.
I think we noticed performance there, Mastercard year to date, down 4.9 percent. Visa is down 5.3% year to date compared to the market, which is down 19.8% right now as we record this. For me, having that type of business makes investing so much easier. I like to say that investing is easy or as hard as you want to make it. It's pretty easy when you think about it, it doesn't take much and just owning businesses like these really makes all the difference in the world I think. It just makes it so much easier to be an investor who falls on hard times owning these types of businesses, along with perhaps the worst smaller speculative ideas that may be a little less safe.
Chris Hill: Later in the week, we'll have our full preview for 2023. I know you'll be there. Jason Moser, it's always great talking to you. Thanks for being here.
Jason Moser: Thank you.
Chris Hill: As always, people on the show may have an interest in the stock they talk about and the Motley Fool may have formal recommendations for or against it, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Thank you for your time. See you tomorrow.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. chris hill he has positions at Alphabet, Apple, Home Depot, Lowe's Companies, Microsoft and Visa. jason moser it has positions in Alphabet, Apple, Home Depot, Mastercard and Visa. The Motley Fool has ratings and recommends Alphabet, Apple, Home Depot, Mastercard, Microsoft, and Visa. The Motley Fool recommends Lowe's Companies and recommends the following options: $120 long calls in March 2023 at Apple and $130 short calls in March 2023 at Apple. The Motley Fool has a disclosure policy.
