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Do Visa and Mastercard Need a Coronavirus Vaccine to Win in 2021?

Visa (NYSE: V) and Mastercard (NYSE: MA) have held up better than most other financial sector stocks in 2020, and this certainly makes sense as the companies make money from consumer spending, regardless of whether sales come in-store or through e-commerce. In fact, the trend toward e-commerce during the pandemic has been somewhat of a tailwind, as online sales are all cashless.

But what about in the post-pandemic world? In this Nov. 25 Fool Live video clip, Fool.com contributors Matt Frankel, CFP, and Brian Feroldi take a look at whether Visa and Mastercard are so-called "reopening" stocks, or if they don't need a vaccine to thrive.

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Matthew Frankel: Looking at a couple of questions, Laura's comment says, "What about MasterCard, Visa, etc?" That's a very good question because, well Brian has given me a big thumps up right now, they're excellent companies. I wouldn't necessarily we call them reopening stocks because they don't care if something is e-commerce or in-person retail, they're going to make their money. That's why you didn't see them pop as much as the other banks or other financial stocks. There's a train going by right here, so bear with me if you hear a giant whistle. But I think they are excellent businesses and Brian just give me a giant thumbs up, so care to explain.

Brian Feroldi: Yes, there are two of the highest quality businesses ever devised. I can't think of a better business model for taking money from society and giving it to shareholders than Mastercard and Visa. I mean, they just are cash printing machines with ridiculous margins. This year, despite shutdown globally, are these companies their revenue is going to decline, single digits? Maybe 10 percent, something like that, and it's expected to rebound. One reason for that is while they're getting killed on the in-person transaction side, and the big thing that that's hurting them is cross-border transactions where you spend money in a different country than you live. That's a major source of revenue for these guys and that business has been a proliferated. That's sound like 50 percent. But how do you buy things online? My computer, doesn't take cash or check, I have to use my credit card and that plays right into Visa and Mastercard's networks. So does the proliferation of a lot of smaller companies like Square (NYSE: SQ). The better square does, the better that is for Mastercard and Visa, they are the toll booths that square has to go through to process transactions, and their ridiculously profitable, and they pay growing dividends, and a buy back ridiculous amounts of stock, and they have great balance sheets. So they are not recovery stocks, they are just stocks. They are just cornerstone stocks in my portfolio.

Matthew Frankel: I was muted. Sorry. I don't consider them stay at home stocks or recovery stocks to your point. They're just good businesses that will do well no matter what. They don't care if you're paying for a purchase from your couch or if you're in a retailer. If you spend a $100, they're still getting their percentage of that. It doesn't really matter how you spend it.

Brian Feroldi: Yeah.

Matthew Frankel: I think they are great stocks and I actually don't own either of those. But I own some of the Squares and PayPals (NASDAQ: PYPL), that kind of stuff.

Brian Feroldi owns shares of Mastercard, PayPal Holdings, Square, and Visa. Matthew Frankel, CFP owns shares of Square and has the following options: short September 2022 $155 calls on Square. The Motley Fool owns shares of and recommends Mastercard, PayPal Holdings, Square, and Visa and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.


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