Visa and Mastercard Are Excellent Investments
Since going public, Visa (NYSE:V) and Mastercard (NYSE:MA) shares have performed incredibly well. Visa shares are up more than 250 percent since going public in March 2008, and Mastercard shares have skyrocketed 1,600 percent since going public in 2006. Despite these strong performances, I think there is a lot more upside in both of these stocks for long-term investors.
This is due to a very strong global secular trend favoring cashless transactions in lieu of cash transactions.
Over the past several years, there has been an increase in the portion of global transactions that have taken place using debit and credit cards. This trend is evidenced in a comparison of the cashless payment industry’s sales growth relative to the global economy. Visa and MasterCard, which represent a majority of credit card and debit card transactions, are growing their combined sales at a much faster rate than the rate at which the global economy is growing. Over the past decade, while global gross domestic product has increased from roughly $37.6 trillion to $70 trillion, or at a 6.4 percent annual growth rate, Visa and MasterCard’s combined revenue has grown from $4.2 billion to over $20 billion, or a 16 percent annual growth rate.
There are three reasons that we have seen this trend, and there is reason to believe this trend will continue for years to come.