1. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Shareholders: 140
Mastercard Incorporated (NYSE:MA) is one of hedge funds’ ten favorite stocks and another favorite of Warren Buffett. The Oracle of Omaha’s $1.45 billion stake in the company is outdone only by Charles Akre’s Akre Capital Management, which has a $2.13 billion position in Mastercard and nearly 19% exposure to the stock in the fund’s 13F portfolio.
Mastercard Incorporated (NYSE:MA) continues to grow at an impressive clip, with processed gross volume dollar growth at 15% in Q1, down only slightly from 17% a year earlier. That lead to net revenue growth of 11% year-over-year at $5.7 billion, despite a 3 percentage point impact from unfavorable exchange rates. And with the global digital payments market expected to grow by more than 50% to $14.8 trillion by 2027, there’s no indication that Mastercard will slow down anytime soon.
Polen Global Growth Strategy considers Mastercard Incorporated (NYSE:MA) a high conviction position, as it revealed in its Q1 2023 investor letter:
“We trimmed Mastercard Incorporated (NYSE:MA) and Visa to equal weights of the Portfolio. Mastercard and Visa operate as a duopoly in a large and growing market. Over the last 50 years, global personal consumer expenditures (PCE) has grown 7-9% annualized. We expect 4-5% long-term PCE growth going forward. Additionally, the shift from cash to credit continues unabated, with a total credit penetration of only approximately 50% globally.3 This shift provides Visa and Mastercard with another ~4-6% of growth. When combined with PCE, this gives both companies high-single-digit to low-double-digit revenue growth opportunities. This growth estimate is before accounting for growth amplifiers like the acceleration of e-commerce, the shift from offline to online, and additional services. Both companies enjoy extremely strong network effects that provide strong competitive advantages.
We have trimmed Visa and Mastercard because their combined weight grew to over 12% of the Global Growth Portfolio because of their recent performance and to fund our increase in Amazon’s position size. We added to both positions when their prices were depressed due to cross-border transactions deteriorating materially from the pandemic. Cross-border volumes came roaring back when travel corridors reopened, and although we are several quarters removed from the cross-border nadir, Visa still grew volumes >30% in 1Q23. Total cross-border volumes are now 132% of 2019 levels. At 4.5% each, both companies remain high conviction positions for Global Growth.”
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