mercredi 29 avril 2020

Mastercard and Google... and Mercedes

Have you seen Mastercard and Google last results?

Google results were good and Mastercard results were excellent. These results are even more great given the fact that both are giga cap (Google = 920B$ and Mastercard = 285B$). But both are still growing a lot and occupy a unique place in the economy.

Many small caps would envy them for their EPS growth:

  • Mastercard EPS went from 1,41$ in 2010 to 7,94$ in 2019;
  • Google EPS went from 13,17 in 2010 to 49,16$ in 2019. 

With these two stocks, you almost don't have to check the numbers. Just with a subjective analysis, you can see that they are two exceptional stocks.

Google has a huge moat. It's probably the first page that opens on your computer. If not, it's one of the first place you go, when you have something to do on the Internet. Google's servers are built close to dams. Which competitor could arrive, given such high barriers to entry? Plus, Google owns Youtube, which is also a place where you surely go often.

Mastercard (like Visa), is the present and the future of transactions. Cash is less and less used. And with COVID-19, many shops incite us to use credit cards instead of cash. This trend won't probably vanish when COVID-19 will be over. Plus, many people have Mastercard and Visa on their phone to pay at the grocery or anywhere else. As humanity grows, transactions grow. It's almost impossible to see a decrease there.

And when you look at the numbers of these two stocks, you see huge cash flows coming in. You'll see a very low debt and, in the case of Google, a mountain of cash on hand. You have everything you want with these two stocks.

But they're almost never on sale. Because they're like two Mercedes. Two high-class stocks, with a very singular signature. How could they have the same valuation as Wells Fargo, for instance? A bank is a bank. Some are better managed than others, but the difference between one bank and another is usually not that huge. Who would pay 25 times earnings for a normal bank with normal earnings?

I try to buy as much Mercedes as I can. One Toyota here and there and, sometimes, a Ferrari. But, mostly, I look for some Mercedes.

1 commentaire:

  1. Bot Mastercard, and CME, on March 18 ... on sale. More opportunities in the next year. The Fed and govt spending wont solve anything ... just kicking the can.