Tom Russo Long MasterCard: Capitalize For Kids Conference ~ market folly

Monday, October 31, 2016

Tom Russo Long MasterCard: Capitalize For Kids Conference

We're posting up notes from the Capitalize For Kids conference 2016.  Next up is Tom Russo of Gardner Russo Gardner who pitched a long of MasterCard (MA).

Tom Russo's Presentation at Capitalize For Kids 2016

•    Wells Fargo currently trades at 10x earnings and almost 4% yield and certainly looks like a cheap stock relative to historical levels and the index. It currently has uncertainty due to its reputational crisis.

•    However, low capacity to reinvest. Currently own 10% of U.S. deposits and cannot grow further. Now are looking to reinvest in their different lines of business. Believes you can generate a good return

•    With MasterCard, while it trades at 20x earnings, approximately 85% of the world still uses cash. Believes there are numerous reasons why this should change over time. MasterCard continues to invest in operating expenses and therefore earnings are currently depressed hence, believes 20x earnings is overstated.

•    Overall, believes that while at 10x earnings Wells Fargo is attractive but has no capacity to reinvest, he would argue MasterCard has the capacity to reinvest and therefore MasterCard (even at 20x earnings) represents better value.

Be sure to check out the rest of the presentations from Capitalize For Kids/Sohn Canada Conference

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