Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Basic Needs Portfolio Selection: Mastercard Inc (MA)

Page 1 of 2

Four weeks ago, I outlined my plans to create a portfolio of 10 companies that all have one thing in common: They provide a basic need or deliver life’s necessities. It’s my contention that basic-needs companies can offer investors stability and growth throughout any market environment thanks to consistent demand, incredible pricing power, and delectable dividends. This portfolio, which I have dubbed the Basic Needs Portfolio, will be pitted against the S&P 500 over a period of three years with the expectations of outperformance for all 10 stocks. I’ll be rolling out a new selection to this portfolio every week for the next six weeks.

You can review my previous three selections here:

Waste Management


NextEra Energy

Today, I plan to introduce the fourth of 10 selections to the Basic Needs Portfolio: Mastercard Inc (NYSE:MA).

Mastercard Inc (NYSE:MA)

How it fits with our theme
I fully expect MasterCard to be a bit of a head-scratcher at first for most investors since financial companies tend to be some of the most susceptible to economic downswings. As is usually the case in a recession, banks see their deposits and loan generations slow, while financial service and brokerage companies often derive less service revenue. On the surface, that isn’t exactly a confidence boost for a credit service company like MasterCard. But, I plan to prove that theory dead wrong.

In fact, Mastercard Inc (NYSE:MA) and its peer Visa Inc (NYSE:V) are possibly the only two near-perfect financial companies to take advantage of in any economic environment. When the economy is booming, consumers are certainly more apt to break out their credit card. Conversely, barring a depression, consumers are also likely to turn to credit in order to facilitate their basic needs purchases through tough times. Aside from an exceptionally small downward blip between 1990 and 1993 and a two-year drop of about 6% during the most recent recession, total consumer credit levels have been on a steady incline over the past 70 years, rising from $5 billion in 1943 to more than $2.8 trillion in June 2013, according to data from the Federal Reserve.

Source: St. Louis Federal Reserve.

The most important aspect about MasterCard and Visa is that they’re nothing more than payment processing facilitators. This means they don’t actually lend the money out — they merely act as the middleman between the vendor and the credit company or bank that provides the “loan” to the consumer — which completely protects them from credit defaults. If that’s not the perfect basic-needs scenario, I’m not sure what is!

The risk
I’ve said it before, and I’ll say it again; there is no such thing as a riskless investment! Even MasterCard and Visa bear some risk. For Mastercard Inc (NYSE:MA), the two greatest risks it’ll face are the potential for a global depression and increasing levels of competition.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!