Credit Card Stocks: Visa vs. MasterCard
September 13, 2009 by Tisa Silver
Filed under Finance
Last week, a Citi analyst upgraded shares of MasterCard from “Sell” to “Hold.” Still not a glowing recommendation, but it was enough to make me take a look at MasterCard (Ticker: MA) and Visa (Ticker: V).
Photo by eliazar, courtesy of flickr
I can’t recommend stocks on this blog, but I can speak to some good qualities that worthwhile stocks should posess (according to me, of course!).
Some of those qualities apply to both MasterCard and Visa.
Steady business – I like companies that will always have business. Debit cards and credit cards aren’t going anywhere, so there will always be a market for the services provided by Visa and MasterCard.
Stability in tough times – Both Visa and MasterCard easily outperformed the market since the credit crisis began in 2007. In the past year, the S&P 500 has lost 17 percent of its value, while MasterCard is down 6.7 percent and Visa is actually up almost 1 percent. (View the 2-year chart)
So, in the clash of the credit card titans which would you pick?
Here are a few stats to think about: Visa has a beta of 0.8 while MasterCard has a beta of 1.2. According to the charts, Visa has outperformed MasterCard in the 1 and 2-year holding periods, but MasterCard has outperformed Visa in the 3 and 6-month holding periods.
Visa’s shares are trading around $72 and MasterCard’s are trading at just under $209 each.
Let me know what you think.
Didn’t Visa go public sometime in 2008?
The big advantage Visa and Mastercard have over companies like Amex or Capital One is that they don’t assume the risk of consumer debt. What I mean by that is they do not directly provide credit to their customers like Amex, Cap One or the banks that issue credit card; they make their money on charging a fee per transactions, which leads some people to describe them as toll booths for electronic commerce, and explains why they held up well during the credit crunch. I wouldn’t necessarily call them cheap on a P/E basis, but if you believe consumers either here or abroad will get energized to buy again, these stocks could be worth a look.
Hi Jim,
Good catch, had to go back and correct that typo. Yahoo does 1,2,5 year ranges on their graphs and I accidentally typed all of those. Neither V or MA has been public for 5 years yet.
The fee income without the risk is exactly what makes these two attractive. From a P/E perspective, neither is cheap compared to their industry average, but I am not sure how seriously to take their industry average if it includes companies like Amex and CapOne, which have different risks.
Go master card is not good especially if you agreed with their financial department. This is all about statement of account ” we agreed if i purchased worth 4000 within the month my annual will be waived ” hahaha!!! thisis not true, if you have experience this kind of scenario better not to have this credit card. For the next billing the subscriber will be suprise for his statement and the customer service will not accept your raised concerns. This is happen on this day September 25, 2009.