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Proprietary Data Insights Top Financial Services Stock Searches This Month
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The Crash of All Crashes If you’re an investor, there’s always a silver lining. Remember that. Because in the bad news we’re about to tell you – and it is bad – there’s a silver lining and an investment idea. You can at least partly blame rising credit card debt on collapsing savings among American consumers. While the big banks aren’t reporting noteworthy problems around credit card delinquencies, the other shoe might be about to drop. At least among a subset of consumers, a point that sits at the heart of today’s investment idea. But first:
Doesn’t take an accountant, rocket scientist, or Elon Musk and his Twitter bots to tell you this math adds up, on average, to a budget deficit among some U.S. consumers. Spending’s rising faster than income. Which helps explain this:
Combine this data with record credit card debt, and it’s clear many consumers aren’t doing well with money. Which is why The Juice continues to like dollar store stocks. But this data doesn’t tell the whole story. Two more stocks we like in this crazy economic environment help complete the picture. |
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2 Stocks We Love Amid the Wreckage on Wall Street |
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Key Takeaways:
The most well-off among us appear to be doing super well. They have cash on hand. Probably even more in stocks and crypto. They’re making good money. And they’re spending it. Without this financially healthy consumer, that BEA data we showed you would be much worse. Today’s investment ideas show that. They’re investors’ #1 and #3 most searched financial services stocks in our proprietary Trackstar database, Visa (V) and Mastercard (MA). Both companies reported impressive earnings last week. Like big banks, Visa and Mastercard crushed headline revenue and profit numbers. But it’s on earnings conference calls that we really learn useful, if not stranger, things. Stranger when you consider them in the context of the data on debt, spending, and saving. Consider this from Visa Chairman and CEO Al Kelly on his company’s call: [W]hile there’s stability, the reality is we do know that there’s some changes in consumer behavior going on, but they’re still spending the same amount of money, and they’re still paying in the same way, which are critical to us. So, we know there’s some substitution going on where people are buying generics versus buying brands. We know that people are spending a certain amount on – an increased amount on food and drug products, and that’s causing them to have less money available for discretionary spending. But […] the affluent customer is still jumping back in the market, and that’s a very, very good thing because of the amount of spend they do […] we know this stuff that is going on, but the reality is that while consumers might be altering a bit what they buy in different categories […] – as I said, they’re still spending the same amount of money and using the same ways to pay as they did before. Similar story on Mastercard’s conference call. Amid horrific earnings lately, particularly in tech, Visa and Mastercard wax super bullish. And not just bullish relative to, say, Meta (META)’s awful earnings, Microsoft (MSFT)’s weak guidance, and Alphabet (GOOG, GOOGL)’s miss. But bullish even if everything in the economy and the stock market was going super well across the board. Think about the obvious reasons. Both companies benefit from everything going on around them. But they don’t have to deal with the B.S. You swipe. They make money.
On that last point, credit card networks processed 45% of consumer payments in 2021, up from 41% the prior year. While there’s room to grow this share domestically, the opportunity is even bigger outside the United States, where Visa and Mastercard continue to expand.
The Bottom Line: Everything we’re seeing points to continued upside for Visa and Mastercard. Even if debt-riddled consumers with little to no savings crash completely, it seems the affluent will continue to spend. And they’ll do it by swiping plastic – credit and debit. Even better, Visa and Mastercard continue to innovate and diversify their businesses. For example, both companies are reinvesting their massive revenues to expand security, fraud, digital, and promotional services to merchants and jump into crypto with cards that allow consumers to spend their coins. While V and MA are up 17.8% and 15.8%, respectively, over the last month, The Juice thinks both have room to run over the long term. Visa is still 12.7% shy of its $235.85 52-week high, while Mastercard is off 21.4% from its 52-week high of $399.92. |
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