We recently compiled a list of the 10 Best American Stocks To Buy For Foreign Investors. In this article, we are going to take a look at where Mastercard Incorporated (NYSE:MA) stands against the other American stocks.
With August Ending, What Can We Expect From US Markets?
Historically, September is considered to be the worst month for stocks. The S&P 500 index has generally averaged a decline in the month of September for decades, which has resulted in many financial news reporters, such as the Wall Street Journal, dubbing September as a weak month for US stocks. So with August coming to an end, many investors in the US and abroad may be wondering whether now is a good time to pick up US stocks for their portfolios.
While history can often be an accurate indicator of stock performance, this is not always the case. This year may very well be an outlier in the historical trend outlined above, seeing as many financial analysts are expecting the US Federal Reserve to move ahead with a rate cut this September. CNBC’s “Power Lunch” on August 21 highlighted that according to the Fed’s recent meeting minutes, it is quite probable that we will be seeing a rate cut this September, which will probably result in stock prices rising and the markets performing better. This is because when a rate cut is announced, consumers and businesses tend to increase their spending and investment, which has a direct and positive impact on stock prices, causing them to rise. As such, if we do see a rate cut next month, investors may actually benefit from investing in American stocks.
How Would a Potential Rate Cut Impact The Markets?
On August 22, Tom Lee, Fundstrat Global Advisors Managing Partner, joined CNBC’s “Squawk Box” to discuss the status of the US markets at present. Here’s what he had to say:
“The FMOC minutes that came out yesterday showed the Fed staff saying this is a strong labor market, while that jobs report that came out Friday and the revisions that just came out show a lot of jobs disappearing. It’s not a stronger market, and I think it gives more ammunition for the Fed to start a cutting cycle, and that’s gonna give a lot of life to the economy and to the markets. Especially cyclical stocks and small-cap stocks.”
According to Lee, investors looking to buy into US equities right now would benefit greatly from a rate cut if it does come about in September. A major beneficiary of such a cut would actually be the tech sector. In this regard, Lee said the following:
“I think tech is still in a good place because of AI, and NVIDIA should reinforce that. It’s not a demanding multiple, maybe 28x forward earnings, which is, for the best, one of the most important companies in the world, not a high multiple. So, if tech is in a good place, and then we get fed cuts, I think it allows the whole overall market to expand.”
Considering the above, US markets may actually be a good place to invest for foreign investors at present, and within these markets, tech may be a good place to start. This is why we’ve compiled a list of the best American stocks to buy for foreign investors, comprising most tech companies. Our list includes some of the best American tech stocks to buy, alongside some of the top US stocks for foreigners.
Our Methodology
We selected the most popular American stocks among major hedge funds to compile our list, by using Insider Monkey’s hedge fund data for the second quarter of 2024. These companies are considered to be the best US stocks to invest in today according to major institutional investors, and should thus be considered by foreign investors looking to buy into American equities.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
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Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 142
Mastercard Incorporated (NYSE:MA) is a financial company based in Purchase, New York. It is primarily responsible for transaction processing and payment-related products and services in the US and internationally. We’ve added Mastercard Incorporated (NYSE:MA) to our list because it’s not only a highly popular US stock, but it has also seen immense growth in the second quarter and seems well prepared for further growth down the line.
In the company’s second-quarter earnings call, Michael Mieback, the CEO, noted that the company’s growth in the second quarter is set to continue in the remainder of 2024 because of two reasons. First, Mastercard Incorporated (NYSE:MA) has incorporated several organizational changes to support its growth algorithm, and second, it is planning on enhancing and expanding its value-added services, such as data analytics, as it continues to embed AI in its products and services.
Another major reason why foreign investors should consider Mastercard Incorporated (NYSE:MA) is that it’s currently breaking into a large untapped emerging market, namely Africa. The company has recently executed two deals, one with Dashen and Ethiopian Airlines and the other with RwandAir and INM Rwanda. Mastercard Incorporated’s (NYSE:MA) involvement in Africa is expected to open up great opportunities for the company, since approximately 90% of transactions in Africa are presently made in cash, leaving great room for a financial company like Mastercard Incorporated (NYSE:MA) to make a significant impact by way of digital transformation there. Additionally, other partnerships with the Commercial Bank of Ethiopia, and I&M Bank in Kenya are also expected to help Mastercard Incorporated (NYSE:MA) increase its share in both of these markets as well.
A total of 142 hedge funds held stakes in Mastercard Incorporated (NYSE:MA) in the second quarter, with a total stake value of $15.3 billion. Akre Capital Management was the most prominent shareholder in Mastercard Incorporated (NYSE:MA) at the end of the second quarter, holding 4,039,349 shares in the company.
L1 Capital mentioned Mastercard Incorporated (NYSE:MA) in its second-quarter 2024 investor letter:
“The share prices of Mastercard Incorporated (NYSE:MA) and Visa, both long term Fund investments, have both drifted down over recent months. There have been no dramatic developments, but there has been a general slight softening in the rate of growth of consumer spending in the U.S. and globally, a court decision rejecting Mastercard and Visa’s proposed settlement of a long-lasting dispute with U.S. merchants as well as other modest adverse regulatory developments. We continue to view Mastercard and Visa as two of the highest quality businesses in the world, and both are well placed to continue to deliver attractive, risk adjusted returns to shareholders over time.”
Overall MA ranks 9th on our list of the best American stocks to buy for foreign investors. While we acknowledge the potential of MA as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.