The Future of Visa and Mastercard

Five and a half years ago, Abnormal Returns asked a bunch of people from the financial blogosphere to share their best pick for the next decade – an asset people would feel comfortable holding. Most chose SPY. There were some calls for Nasdaq, AIG, Apple, Ford, Emerging markets. I chose Visa and/or Mastercard.

Here’s my reasoning in 2012:

I am not a long-term investor per se.10 years is an eternity and a lot of price cycles will change over that period of time. Nevertheless, for the purposes of this exercise, I would go with Visa ($V) or Mastercard ($MA). They have so many catalysts going for them – rising online sales, digital wallets, emerging markets and are part of the S&P 500 which will likely do well too.”

Sometimes, simple and obvious things in the market work out better than you expect.

I am still bullish on Visa and Mastercard. They continue to ride the wave of massive smartphone adoption and rapidly rising online and cashless transactions around the world. But I also pay attention to the potential threats around the corner. The blockchain technology will likely create many new competitors for Visa and Mastercard. They are not going anywhere. They will continue to grow but their margins are likely to come under pressure. I think we are at least five years away from that happening.

What is to stop Apple and Google from creating a bank? Quite a few of their users would proudly transfer their finances to the Bank of Apple and the bank of Google. More and more people will use their phone as a digital wallet and pay everywhere with it. Services like Venmo will become more popular and share less personal information. All merchants will surely love a transaction that doesn’t involve paying 3% to Visa or MA.

What Do The Best-Performing Stocks in 2018 Have In Common?

20 stocks have more than doubled year-to-date.

Many are biotech, but this is a cyclical, not a structural reason. A structural reason is one that persist; one that shows over and over again.

All of them had a market cap of under $1 Billion on January 1st.

All of them have a float of under 100 million shares. Most have a float of under 50 million shares.

Float is the difference between Outstanding Shares and Restricted Shares.

Restricted shares cannot be traded until certain conditions are met. They are usually employees compensation stocks that have not been vested yet. Founders’ stock that is locked up (the founders and private investors in new public companies are usually not allowed to sell their shares in the first 6 to 12 months after the IPO).

A small float can cause a major supply/demand disbalance and a substantial price appreciation or depreciation in a short period of time.

A small float is a double-edged sword. It can lead to fast moves but also liquidity can disappear suddenly and leave you hanging if you own a large number of shares.

Most of the best performers YTD were neglected. They did not have strong momentum going into 2018. Most were/are not profitable. None of them are fastest growing companies.

Most started their move with a huge-volume price expansion. Then, they consolidated and gave a decent secondary entry.

Keep in mind that this analysis is made on a really short time frame. Year-to-date means less than three months as of today. If you study the performing stocks for the past 3 years, you might find out entirely different reasons behind their moves.

Know your time frame and the catalysts that matter the most for it.

Online Travel Agency Stocks Are Waking Up

After spending the last five months going nowhere, CTRP, PCLN, and EXPE are trying to retake their 50-day moving averages. Relatively high short interest, strong earnings growth, a bull market, and a long technical base might be the recipe for a run in the fourth quarter.

Better To Be Lucky Than Good, Right?

Extremely successful people like to play humble and say they have been very lucky in so many aspects of life. But how much of the so-called luck is actually self-made and how much is a random occurrence, a destiny, if you will?

Yes, there are people who hit the lottery. There are people who are born into rich families with well-read and well-connected parents and who have the opportunity to get the best education, diet, and healthcare possible. This type of luck certainly plays an important role and can provide a significant head start in life. But how much of what is widely considered luck is actually self-made?

People who create more opportunities in their lives are likely to experience more luck.

Which behavior is likely to create more and better opportunities for you? Staying at home and waiting for something magical to somehow happen, or going where the action is and meeting new interesting people?

Almost everyone has the option to go to a conference and meet people we admire and we would love to collaborate with, but very few arrive with an open mind.  How many forget about their ego for a second and make the first step to introduce themselves and create new professional relationships at that conference?

You can complain how hard the current job market in your profession is or you can write an email to someone you admire and suggest five ways to improve their business and make money. You give before you ask. That’s how life works. In most cases, you don’t even need to ask for a favor back. When you give first, the people who you actually want to work with will provide back without you even asking.

Is it luck meeting a beautiful, smart girl who seems way out of your league and mustering the courage to ask her out?

Being at the right place at the right time can make all the difference in the world. I suspect that at some point in their lives, many people have been at the right place at the right time. But how many actually notice that opportunity and more importantly, are prepared to take advantage of it?

Luck is when preparation meets opportunity. Not only are lucky people creating more opportunities in their lives. They are working on being ready for them.

How many people spend an hour every day reading a fascinating book, so they can have more ideas, compound knowledge and be a lot more interesting during a conversation? Being more useful helps to build a better and wider network of friends and acquaintances, which brings more great opportunities in your life.

Is it luck if you write a well-thought-out post every day and you are able to amass a large following over the years, and eventually you get an amazing book deal that kick-starts a lucrative speaking career?

Is it luck investing in a hundred startups in 10 years, learning how the business works, and eventually picking one that returns 100 times your money?

Is it luck if someone consistently finds great trading ideas in the market, or is it a skill honed by years of looking at hundreds of charts on a daily basis?

Is it luck noticing when the market has changed its character and adapting properly to the new reality, or is it a skill created by many years of carefully studying market cycles and corrections?

How many people know their exact strengths and have chosen a career that maximizes their natural strengths? How many have chosen to work in an organization that is most likely to reward them for their strengths?

Lucky people take practical steps to reduce the impact of bad luck in their lives.

Everyone has bad days in their lives. Not everyone approaches bad days with a positive attitude, an understanding that challenges are the salt of life, troubles are temporary and eventually, everything will end up well.

How many people are conscious of their diet and work out regularly, so they don’t get sick more often?

How many people proactively work on their core and their posture, so they don’t get frequent back injuries?

How many people make a conscious effort to laugh every day, so they are happier and therefore more productive and creative?

How many work on learning a new skill or improving an existing skill every month? 

How many consciously pick the people they spend the most time with because they understand the impact of their closest friends on their overall lives?

What looks like luck is often the result of attitude towards life.

Having a positive mindset can make all the difference in the world. Our expectations influence everything that happens to us.

What type of behavior is likely to create more and better opportunities?

Imagine you go into a meeting, expecting everything to go flawlessly. Your positive attitude will be immediately reflected in your overall behavior, your body language, which will in turn impact the way everyone else at the meeting feels and behaves. An upbeat approach is likely to lead to a great atmosphere of productive sharing and problem-solving. Compare that to someone who goes into a meeting in a gloomy mood and with low expectations. His negative mindset will immediately impact his overall demeanor, which will have an effect on the way other people respond and behave.  Such type of approach is likely to lead to fewer smiles, more wasted time, negative energy, and less collaboration.

The path of least resistance is to accept that most of life is luck. The trouble with this way of thinking is that it robs you out of the opportunity to actually work on getting luckier.

“Luck is not a magical ability or a gift from the gods. Instead,

it is a state of mind―a way of thinking and behaving.”

Dr. Richard Wiseman, Author of The Luck Factor

The Future of Tesla


Toyota averages about $2,700 earnings per car by making 10.2 million vehicles per year.

Ford earns about $1000 per car by producing about 6.4 million vehicles per year.

Porsche earns about 17,000 by making about 225k cars per year

Tesla made 84k vehicles in 2016. The price tag of most of them is 80-120k. It’s hard to estimate how much are they making per car because Tesla is reinvesting all its income into building capacity and innovation.

Tesla 3 is expected to be a game changer for the company and the car industry. The trouble is that at 35k, Tesla is not going to make any money on it. At least, not in the first 1-2 years until it reaches a capacity that cut its costs down significantly.

Looking at the price action in TSLA, there are a lot more bulls than bears; a lot more believers than disbelievers. The latter is important for two reasons:

  1. Expectations can turn into self-fulfilling prophecies.
  2. All trends need doubters; otherwise, there would not be anyone left to buy.

Disclosure: No current position in any of the stocks mentioned.