We recently compiled a list titled Starter Stock Portfolio: 10 Safe Stocks To Invest In Now. In this article, we are going to take a look at where Mastercard Incorporated (NYSE:MA) stands against the other safe stocks to invest in.
The Market Outlook for the Rest of 2024
A probable rate cut has provided hope for the economy. Despite that, the impact on financial markets and stocks remains uncertain. On September 4, Adam Parker, Trivariate Research founder and CEO, appeared in an interview on CNBC. Parker was not surprised that tech stocks were down by close to 4% at the beginning of September, that too right before an impending rate cut. Parker highlights that the inconsistency in the market at the moment is not normal, and with multiple rate cuts over the next two years, he has no reason to hold a positive economic outlook. He suggests that eight probable rate cuts indicate that the economy is slowing, consumer spending is declining, and unemployment is rising, all of which are not good signs for the market. The interviewer counter questions that eight rate cuts with a 25 basis point reduction are not as disastrous to presume a faltering economy. Parker then highlights that rate cuts in the past have been supported by consistent data, an incremental fiscal, and an expansion of the balance sheet, all of which are currently out of the picture. You can also read our piece on the best battery stocks to buy according to short sellers.
The Possible Impact of Rate Cuts on Stocks
On September 2, CNBC published a detailed report on the impact of rate cuts on the stock market in the United States. The Fed, in the footsteps of countries in Europe and Asia, recently announced an easing cycle, after a long period of high interest rates. As per current pricing data, the Fed is expected to have three 25-basis point cuts by the end of this year. Speaking of the global economic outlook, 2025 will see a lower-rate environment followed by easing inflationary pressures. However, the fear of recession in the United States tells another story. Analysts believe that the last four months of 2024 will be considerably weak and choppy amid geopolitical factors, uncertainty from the AI sector, corporate earnings, and most importantly, an overdue consolidation correction.
On September 3, JP Morgan reported that investors must not expect the cutting cycle to provide a fresh start to stocks. Leading strategists at the firm suggested that the rate cut cycle is rather reactive and is in response to a wilting economy, having little to no impact on stocks. Paul Christopher, head of global investment strategy, on the other hand, suggested that the market environment today resembles the market in 1995, increasing hopes for a market upside amid stable GDP strength and forecasts.
Bear market or bull market, certain stocks deserve a place in every investor’s portfolio. These are long-term opportunities to hold and will continue to provide superior returns, as they have for decades.
Our Methodology
To come up with the 10 safe stocks to invest in now, we looked for well-established companies in the energy, finance, healthcare, technology, and fast-moving consumer goods (FMCG) industries. These stocks have a history of performing well and boasting consistent financial results, making them ideal and safe long term investments for beginners. We then picked the top 10 stocks that were the most widely held by money managers and ranked them in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A woman using a payment terminal at the checkout of a store showing payment products and solutions.
Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 142
Mastercard Incorporated (NYSE:MA) is a multinational payment services corporation in the United States. It facilitates electronic funds transfers through branded debit cards and credit cards. The company provides financial services to large companies, small to medium-sized enterprises, banks, credit unions, and the public sector.
In the second quarter of 2024, Mastercard Incorporated (NYSE:MA) increased its revenue by 13% and net income by 24% year-over-year. During the same quarter, the company managed $2.4 trillion in payment volume, up by 50% from five years ago. Other than payment services, the company is also venturing into value-added services like data analytics, fraud prevention, and cybersecurity solutions, which posted an 18% increase in sales in the previous quarter.
Mastercard Incorporated (NYSE:MA) aims to bring 1 billion people into the digital economy by 2025. To achieve such, the company launched several partnerships in the past few months. Earlier in August, Mastercard Incorporated (NYSE:MA) launched an Open Banking program to facilitate lending via digital verification of income and employment. During the same month, Mastercard Incorporated (NYSE:MA) launched its payment passkey service in India to improve security and improve payment speed.
While the macroeconomic environment is uncertain, the company does hold a strong position in the industry and has strategic initiatives locked in solidifying its future growth potential. Analysts are bullish on MA and their 12-month median price target of $528 points to a 10% upside from current levels. According to our database, 142 hedge funds held stakes in Mastercard Incorporated (NYSE:MA) in the second quarter, with positions worth $15.34 billion. As of June 30, Akre Capital Management is the largest shareholder of the company with a position worth $1.78 billion.
L1 Capital said the following about Mastercard Incorporated (NYSE:MA) in its Q2 2024 investor letter:
“The share prices of Mastercard and Visa, both long term Fund investments, have both drifted down over recent months. There have been no dramatic developments, but there has been a general slight softening in the rate of growth of consumer spending in the U.S. and globally, a court decision rejecting Mastercard and Visa’s proposed settlement of a long-lasting dispute with U.S. merchants as well as other modest adverse regulatory developments. We continue to view Mastercard and Visa as two of the highest quality businesses in the world, and both are well placed to continue to deliver attractive, risk adjusted returns to shareholders over time.”
Overall MA ranks 6th among the safe stocks to invest in. While we acknowledge the potential of MA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published on Insider Monkey.