Motley Fool Money - Don't Bet Against Behemoths

Episode Date: December 28, 2022

Disruption is not a given, nor is it easy. (0:21) Jason Moser discusses: - How Visa and Mastercard fared in a year dominated by crypto news - Why fortress balance sheets will be an even bigger asset in the new year - Leaders he's watching in 2023 Stocks mentioned: V, MA, MSFT, APPL, GOOG, GOOGL, HD, LOW Host: Chris Hill Guest: Jason Moser Engineer: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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Motley Fool money starts now. I'm Chris Hale joining me today, Motley Fool's senior analyst, Jason Moser. Thanks for being here. Happy to be here. Thanks for having me. I wanted to chat with you. In part because of something that you had tweeted out a few weeks ago. And 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 are 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 Chimas Palahapitia says Visa and MasterCard will be the biggest business failures in 2022, losing out to alt-coin linked projects. Yeah. And as we're having this conversation, Visa and MasterCard are both down in the neighborhood of 7% year-to-date. That puts both stocks about, call it, eight percentage points.

better than the overall market. And the point is not to single out Chimaz and say, this guy got it wrong. It's really to talk about the part of disruption that doesn't get as much attention. And it's this question of when companies say that they're 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? Yeah. Yeah. Well, I mean, that's a really good point. I mean, I did not tweet that out to single out Chimov so much. I mean, I do. He has a penchant for making bold hyperbolic statements like that. That can be, you know, just take it for what it's taken for what it is, I guess. But that in particular caught my eye for a number of reasons. And it just it feels it feels clickbait to an extent. it, but yeah, I think when you consider a new market, such as crypto and alt-coin projects, and then you look at these very well-established businesses, these businesses in MasterCard

and Visa, any business worth its salt is going to constantly be focused on their competition around the market that they serve, the competitive dynamics within that market. market threats that could be coming down the pike. I mean, that's just any business worth its salt is going to do that. And to think that MasterCard and Visa are not doing that is naive or just ignorant. And I don't, I'm not calling him naive or ignorant, but he maybe just spoke before he thought. To me, I mean, 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, okay?

And if you look at fiscal 2022 for Visa, they did $11.6 trillion in payments volume. They processed 192.5 billion transactions. You look at MasterCard and it's really, it's more the same. Gross dollar volume of $7.7 trillion, transactions of 112.1 billion. billion. I mean, these are not businesses that are going to be easily disrupted. And I'm not saying they can't be. I mean, they certainly can be. I think any business can be disrupted. But you also have to consider the fact that businesses like these, regardless of where you stand on crypto, and I think generally speaking, I'm just, I'm not, I would call myself a skeptic.

I mean, I'm not really, you know, looking to invest in that space. But that, but that's 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, right? And so I think that 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. Well, and broadening it beyond the financial industry, it really does seem like, in part because we're starting a new year. And 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. And I think, I don't know what's going to happen in the stock market in 2023. I'm generally optimistic, but it seems like those companies are better situated than anybody. The behemots just seem like 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 a piece of mind that smaller upstart companies that are more dependent on a low interest rate environment don't have. 100%. I mean, just like in our personal finances, I mean, 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 just puts them in a completely different mindset. I would totally agree with that. I put businesses like MasterCard and Visa, I would include in that conversation, right? I mean, I don't know what the year is going to hold for the stock market either, but I'm pretty sure that the tailwinds that continue to develop in cashless transactions and in the digital movement of money, I think those tailwinds are going to continue to grow and that people are going to be spending money, right? Money has to get from point A to point B. That's not going to change either. And so,

yeah, 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. I mean, you look at Apple and smartphones, I think, are the lifeblood of much of what we do on a daily basis. And while Apple doesn't own the smartphone market, they certainly control a big piece of it. And I think that disrupting the iPhone is going to be a tall order. It's not anything that's going to happen anytime soon. Businesses that we talked about recently as well, like Home Depot and Lowe's, right? I mean, home improvement is going to be something that's just going to constantly exist. I mean, when you have this massive installed base

of housing, right, that we have here domestically. I mean, that stuff has to be maintained. And so, yeah, these, you know, I'm not looking through the lens of one year. I mean, these are businesses that I feel like you can own for, I mean, indefinitely, really. I feel like these are businesses that you want to try to hang on to 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 yeah, I mean, to me, owning these types of businesses, the behemus, I mean, this was a great year to own those, right? I mean, you look back to the way Visa and MasterCard performed. I think, you know, you noted the performance there. I mean, 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. And to me, yeah, it feels like owning those types of businesses make investing a lot easier, right? I mean, you know, I like to say investing is as easy or as difficult as you want to make it. I mean, it is pretty darn easy when you think about it. I mean, it doesn't take a lot. And just owning businesses like these really make all the difference in the world, I think. And 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, sort of more speculative ideas that maybe are a little bit less certain. 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. Thank you. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks based solely on what you hear. I'm Chris Hill. Thanks for listening.

I'll see you tomorrow.