What stock did Buffet pick up 189,000 more shares of?
Even if you have been living under a rock, you probably still know how Warren Buffet is. And, its probably a good idea to keep stay tuned as to what moves Buffet makes with his portfolios. Investors like to keep track of large investors and what moves they make. Good idea? Many time it is, as these professionals are adept at finding good long term companies.
Back in May of 2011, Buffet chaired, Berskshire Hathaway (NYSE: BRK) disclosed that they made an initial investment in Mastercard (NYSE:MA). Then later in August, BRK increased its holdings in Mastercard by 189,000 shares, nearly doubling the investment. This bring their total to over 400,000 shares of the global payment solutions company. While this may just be a drop in the bucket for Buffet, one thing to note is, he made his initial investment in this company back in May, and then again increased his holdings just months later. It might be safe to assume they will increase their holdings of Mastercard again in the near future.
Why would Buffet consider increasing his holding in Mastercard?
Some factors to consider; The United States is becoming increasingly dependant on electronic means of communications. Getting connected and staying connected are becoming an essential quality of life us. When was the last time you were on Facebook? When was the last time you sent or received a text? More importantly when was the last time you made an online purchase? How many people have auto-pay on certain bills, like your cell phone?
As you can see we are becoming a cashless society and our means of paying are either debit cards, credit cards and even gift cards. Do you remember back in the late 90s and even into the early 00s, many consumers were skeptical and leery about entering their payment information online, they just didn’t trust their information being beamed through the internet. Now, most people have no qualms about making online purchases, it has become a very accepted way of shopping. You can have your bank account set up directly draw upon when making purchases which seems a bit dangerous. Or you can use your credit or debit cards. Card companies, such as Mastercard, normally offer a certain amount of guaranteed protection for consumers, making this method much more attractive. I personally find it a hassle to have to hit the ATM before I go anywhere, and I certainly am guilty of not having a single dollar on me, just my card. This could have a huge impact on the panhandling industry.
Did you know its cheaper for a merchant to charge your debit card then it is to charge your credit card? The banks charge a higher fee to merchants on a credit card transaction vs. a debit. And with banks, such as Bank of America, now charging a debit card fee to consumers, we will probably start to see a big rise in credit card transactions in lieu of debit. How will this affect merchants? And how will they adjust to a loss in profits per transaction? You would think this makes a case for banks, but banks are exposed to the credit crisis and card companies such as Mastercard generally are not. Card companies get their fees per transaction no matter what without having to worry that the consumer pays their credit card bill. That’s the bank’s job.
Another factor to consider is; this need to stay connected should spread across the world into developing nations as they increase their wireless and communications infrastructure. Quality of life is rising in places such as India, China, South America and even Africa and electronic forms of payment should become the standard there too. When was the last time you actually received a physical paycheck? I can’t remember the last time I wrote a check. It’s just cheaper to go paperless.
It is a proven marketing fact that the less steps it takes to get a consumer from product to point of sale, the better chance of getting a sale.
In light of the above, the case for card companies such as Mastercard and even Visa is highly supported by our way of life and our increasing dependence on electronics. The companies with the biggest footprint in this industry would be Mastercard, Visa and American Express. Would Buffet consider increasing his investment here? There is a lot of room to grow.
On a side note, with everyone starting to go wireless, it has been projected by analysts that more people will own more smart mobile devices then laptops and desktop computers. Its almost a status qualification to own the coolest smart device. That being said, increasing demand on wireless networks should start to bolster the wireless equipment sector, cellular towers and transmission equipment. People hate dead spots! Check out our article regarding this topic here.