In this podcast, Motley Fool senior analyst Jason Moser discusses:
- How Visa and Mastercard fared in a year dominated by crypto news.
- Why fortress-like balance sheets will be an even bigger asset in the new year.
- Leaders he’s watching in 2023.
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
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This video was recorded Dec. 28, 2022.
Chris Hill: A wise man once said, when you come at the king, you best not miss. Motley Fool Money starts now. I’m Chris Hill, joining me today, Motley Fool Senior Analyst Jason Moser. Thanks for being here.
Jason Moser: Happy to be here. Thanks for having me.
Chris Hill: I wanted to chat with you in part because of something that you had tweeted out a few weeks ago. Let me set this up for folks listening because I do think we were chatting about this right before we started recording. I do think we’re in a very interesting moment for stock investors. A few weeks ago, you had tweeted out a picture of a story that TechCrunch did almost exactly one year ago. It was December 31st, 2021 and the headline was billionaire Chamath Palihapitiya says Visa and Mastercard will be the biggest business failures in 2022 losing out to altcoin-linked projects.
As we’re having this conversation, Visa and Mastercard are both down in the neighborhood of seven percent year to date that puts both stocks about, call it eight percentage points better than the overall market. The point is not to single out Chamath and say, this guy got it wrong. 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 that they are going to disrupt an industry. I feel like we don’t talk enough about the question, how do you think the companies that you’re attempting to disrupt are going to react?
Jason Moser: Yeah. That’s a really good point. That did not tweet that out to single out Chamath so much. He has a penchant for making hyperbolic statements like that. That can be taken from what it is I guess. But that, in particular, caught my eye for a number of reasons and it feels clickbaity to an extent. But I think when you consider a new market such as crypto and Altcoin projects and then you look at these businesses and Mastercard and Visa, any business worth itself is going to constantly be focused on their competition around the market that they serve, the competitive dynamics within that market, threats that could be coming down the pike, that’s just any business worth itself is going to do that.
To think that Mastercard and Visa are not doing that is naive or just ignorant. I’m not calling him naive or ignorant but he may be just spoke before he thought. Just look at some of the numbers here in regard to Mastercard and Visa and you can see quickly these are not businesses that are going to be easily disrupted. If you look at fiscal 2022 for Visa, they did 11.6 trillion dollars in payments 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 dollars transactions of 112.1 billion, these are not businesses that are going to be easily disrupted. 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 where you stand on crypto. I think generally speaking I would call myself a skeptic, 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 potentially be a threat and also potentially an opportunity. I think that for me you need to make sure you understand with these types of businesses that absolutely they are looking at the competitive threats and I think they’re assessing that landscape on a constant basis.
Chris Hill: Broadening it beyond the financial industry, it really does seem in part because we’re starting a new year. I think it’s natural for us just to, whether it’s with our personal health or the news cycle or finance or whatever to start in January with essentially a fresh set of eyes. When I look through that lens, I look at large companies with fortress balance sheets like Microsoft and Apple and Alphabet. I think I don’t know what’s going to happen in the stock market in 2023. I’m generally optimistic but it seems those companies are better situated than anybody. The behemoths just seem they are 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 fortress balance sheet, it buys you peace of mind that smaller upstart companies that are more dependent on a low-interest rate environment don’t have.
Jason Moser: One hundred percent. Just like in our personal finances, having a rock-solid balance sheet can make the days just a lot easier and take a lot of stress off. Businesses that are putting themselves in this position as well. It puts them in a completely different mindset. I would totally agree with that. Businesses like Mastercard and Visa, I would include in that conversation. I don’t know what the year is going to hold for the stock market either but I’m pretty sure that the tailwinds continued to develop in cashless transactions in the digital movement of money, I think those tailwinds are going to continue to grow in that people are going to be spending money. Money has to get from point A to point B.
That’s not going to change either. You look at these businesses that have put themselves in a position either by just managing the business smartly or just possessing a product or a service that people can’t really go without, you look at Apple, smartphones I think 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 big piece of it. I think disrupting the iPhone is going to be a tall order. It’s not anything that’s going to happen anytime soon. This is what we’ve talked about recently as well, Home Depot and Lowe’s.
Home improvement is going to be something that’s just going to constantly exist. When you have this massive installed base of housing that we have here domestically, that stuff has to be maintained. Now looking through the lens of one year, these are businesses that I feel you can own indefinitely really, I feel these are businesses that you want to try to hang onto indefinitely and you, of course, assess the state of the business every year. Make sure that those competitive forces aren’t eroding the potential that these businesses possess. But to me, owning these types of businesses that behemoths, this was a great year to own those. Look back to the way Visa and Mastercard performed.
I think we noted that the performance there, Mastercard year to date down 4.9 percent. Visa year-to-date down 5.3 percent versus the market, which is down 19.8 percent right now as we’re taping this. To me, it feels like owning those types of businesses make investing a lot easier. I like to say investing is easy or as difficult as you want to make it. It is pretty darn easy when you think about it, it doesn’t take a lot and just owning businesses like these really make all the difference in the world I think. It just makes it far easier to be an investor going through the difficult times owning these types of businesses, along with perhaps the smaller worst speculative ideas that may be a little bit less certain.
Chris Hill: Later in the week, we’re going to have our full preview for 2023. I know you’re going to be there. Jason Moser, always great talking to you. Thanks for being here.
Jason Moser: Thank you.
Chris Hill: As always, people on the program may have an interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against so don’t buy or sell stocks based solely on what you hear. I’m Chris Hill. Thanks for listening. We’ll see you tomorrow.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Chris Hill has positions in Alphabet, Apple, Home Depot, Lowe’s Companies, Microsoft, and Visa. Jason Moser has positions in Alphabet, Apple, Home Depot, Mastercard, and Visa. The Motley Fool has positions in and recommends Alphabet, Apple, Home Depot, Mastercard, Microsoft, and Visa. The Motley Fool recommends Lowe’s Companies and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.