Insider Trading at Mastercard Inc (MA), Are Shares Too Rich?

We track insider transactions because we believe that no one knows a company better than the people who work there. It has been shown that insiders tend to outperform the market by as much as 7% annually (read more about how this strategy can boost your returns).

In a recent Form 4 filing with the SEC, three of Mastercard Inc (NYSE:MA)’s insiders decided to sell off over 5,000 shares collectively. These include Gary Flood—President of Global Products and Solutions, Noah Hanft—General Counsel, and Chris Mcwilton—President of U.S. Markets. In total, the sell-off was in the price range of $485-$490 per share.

This is the first sell-off by any of these insiders since March, where the same three insiders collectively sold off over 20,000 shares in the range of $415-$425 a pop. Since Mastercard broke the $420 mark, there have been a number of notable large insider sales.

President of Mastercard Technologies, Robert Reeg, sold off nearly 5,000 shares during August – just above $420 per share – and Chief HR Officer Stephanie Voquer sold off 3,000 shares in September above $440 per share. The Mastercard Foundation has also been on a steady selling spree, having sold off over 200,000 shares since July—the first sale since early spring. Despite the negative insider sentiment, billionaire Jim Simons’ firm Renaissance Technologies is one of the top investors in Mastercard (check out Simons’ top picks).

Gross dollar volume for Mastercard is expected to be up in 2012 and 2013, leading to revenue boosts of 10% and 12%, respectively. Mastercard is expected to grow EPS at 18% annually over the next five years, but it may also see slower international growth. Mastercard could, however, see better-than-expected growth assuming it can continue to make strategic investments into e-commerce and mobile payments.

One fundamental positive for both Mastercard and its most formidable opponent Visa Inc (NYSE:V) is the consumer shift from using cash/checks to cards. Although Mastercard is expected to see gross domestic volume growth (GDV), Visa expects GDV to remain flat. Even so, Visa expects to grow revenues at a greater pace than Mastercard, at 13% in 2013 and 12% in 2014.

Unlike Mastercard, Visa should see positive growth in payment volumes driven by overseas and emerging markets. Visa’s long-term growth is expected to outpace Mastercard by 2 percentage points and is forecasted at 20% compounded annually. Although Visa’s trailing P/E can be intimidating at 47x, the fact that its forward P/E is 18x suggest investors might not be fully taking into account Visa’s rapid growth opportunities. Billionaire Ken Fisher – founder of Fisher Asset Management and columnist for Forbes – is one of the top firms showing confidence in Visa and upping his stake nearly 50% (see Fisher’s new picks).