We recently compiled a list of the 7 Best Warren Buffett Dividend Stocks According to Short Sellers. In this article, we are going to take a look at where Mastercard Incorporated (NYSE:MA) stands against the other Warren Buffett dividend stocks.
Although the financial world is often seen as serious and analytical, short selling introduces an element of excitement and complexity to market dynamics. Short selling is a strategy where investors borrow shares of a stock, anticipating that the market price will drop by the time they need to purchase the shares to return them. While many short sellers have scaled back since the meme stock frenzy began, the strategy of betting against stocks remains in practice. Short sellers saw strong gains in the second quarter of this year, successfully betting against stocks despite the broader market’s upward trend. Data from S3 Partners LLC showed they earned $10 billion in paper profits during the quarter. These gains, driven by sectors like industrials, healthcare, and financials, helped offset a $15.7 billion mark-to-market loss in the technology sector.
The fact that short sellers were able to profit while the market was rising suggests that investors are concentrating on a handful of large-cap tech stocks amid an uncertain economic environment, leaving vulnerabilities in other sectors. During the quarter ending June 28, the broader market gained roughly 4%. Meanwhile, the tech-focused Nasdaq 100 Index saw a 7.8% gain over the same period.
Also read: 10 Worst Booming Stocks to Buy According to Short Sellers
It’s clear that short sellers capitalize on overlooked or troubled areas of the market. Last year, the turmoil in regional banks attracted short sellers, who stirred controversy by examining lenders’ balance sheets for vulnerabilities linked to rising interest rates and betting against their stocks. In 2023, while the broader market rallied, this sector became a key area of success for these traders. The volatility that affected regional bank stocks earlier this year again generated substantial paper profits for short sellers, echoing the gains they made during last year’s upheaval in the sector. Now analysts are viewing short sellers in a completely new perspective. Carson Block, the founder of Muddy Waters Research, is convinced that markets need short sellers more than ever. However, he notes that a persistent stock rally and new regulatory challenges are creating difficulties for his bearish colleagues, who are struggling to secure capital. Here are some comments from the investor:
“It’s easy to demonize short sellers as part of a populist message and somehow call us the suits. The market needs short sellers more than ever given the amount of games that are being played, but if the long-side doesn’t care, this can continue — until it doesn’t.”
Alongside Block, numerous respected investors and experts have emphasized that short selling plays a crucial role in public markets. It helps enhance price accuracy, ensures better capital allocation, prevents financial bubbles, and uncovers fraud. In 2006, during Berkshire Hathaway‘s annual shareholder meeting, Warren Buffett highlighted that financially strong companies could benefit from short sellers, as they eventually have to buy back the stock. He believes short sellers often uncover wrongdoing or suspicious activities. Buffett remarked that there is nothing inherently wrong with short selling, noting that in many cases where there has been significant short interest, the companies involved were later exposed as fraudulent or engaging in questionable practices. With this, we will take a look at some of the best Warren Buffett dividend stocks according to short sellers.
Our Methodology:
For this list, we first scanned Berkshire Hathaway’s 13F portfolio as of Q2 2024 and identified dividend stocks from the list. From that list, we shortlisted dividend companies with the lowest percentage of shares outstanding that were sold short as of September 15 and ranked them in descending order of the stocks’ short interest.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds 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)
Short % of Shares Outstanding: 0.64%
Mastercard Incorporated (NYSE:MA) is an American credit card company that offers payment card services to millions of customers around the world. The company continues to see steady growth in its global card numbers. By the end of Q2 2024, its partners had issued 3.4 billion cards under its brands, including Maestro, which is being gradually discontinued. This marks an increase of roughly 200 million new cards compared to the 3.2 billion total at the same time in 2023. The stock has delivered a 17% return to shareholders year-to-date.
Mastercard Incorporated (NYSE:MA) remains an industry leader, consistently proving its strength through its earnings reports. In the second quarter of 2024, it achieved double-digit growth in both net revenue and earnings. This success was driven by steady consumer spending, a 17% rise in cross-border volume, and high demand for its value-added services and solutions, with net revenue increasing by 18%, or 19% when adjusted for currency fluctuations. These results underscore the unique value created by the synergy between payments and services, further accelerating the shift toward digital solutions.
Mastercard Incorporated (NYSE:MA) has consistently upheld its commitment to fulfilling its obligations to shareholders. In the most recent quarter, the company paid $615 million to shareholders in dividends. Moreover, it has been rewarding shareholders with growing dividends for the past 11 consecutive years. The company offers a quarterly dividend of $0.66 per share and has a dividend yield of 0.54%, as of September 15.
As of the close of Q2 2024, 142 hedge funds in Insider Monkey’s database held stakes in Mastercard Incorporated (NYSE:MA), up from 148 in the preceding quarter. The consolidated value of these stakes is over $15.3 billion.
Overall MA ranks 1st on our list of the best Warren Buffett dividend stocks to buy. While we acknowledge the potential for MA as an investment, our conviction lies in the belief that some 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 at Insider Monkey.
