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New trade – MasterCard (MA) buy long stock – building my ROTH

Today I bought 16 shares of MasterCard (MA) stock. It was a long wanted trade, but I never did it. At first I bought Visa (V) a few days after IPO for $45 a share and a few months later I sold it for $55 a share.

 
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I was a chicken. I didn’t understand Visa nor MasterCard and I sold. Now Visa is trading for circa $200 a share. Since my sell, I have been kicking my butt for selling.

MasterCard was selling for $840 a share and that was a bit discouraging. In January the company split the stock 10:1 and $84 a share was “affordable” for me. When the correction in Wall Street started, the stock dropped to $74 a share and even a bit lower. That was something which caught my attention.

 
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MasterCard is not a dividend company I would normally buy. It’s yield is puny (only 0.60%), it’s dividend growth is 29%, but they only have 1 year dividend history.

So why I bought it?

It is the unique business model MasterCard and Visa use to make money. Many people fail to understand this model. The greatest example of that failure is when you saw credit card companies and banks falling during the credit crisis, or credit fees caps, Visa and MasterCard were falling too. But none of them are exposed to borrowers, none of them risk a loss of money unlike lenders. MasterCard and Visa make money on fees whenever you swipe your plastic, be it debit or credit card. That’s it. They do not lend money, they do not deal with delinquencies, nothing like that.

 
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They are just a money processing gateway and they get always paid for it.

This makes them so unique and money cows which made me to correct my previous mistake and buy it. Both are loaded with cash and both have no or little debt.

What else you want?

 
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I believe, MasterCard will grow back to hundreds level again. I can’t say when that happen, but it will happen. And I want to ride that wave.

To buy MasterCard I used my contingency or conditional trigger order trade. Below see the list of the triggers I maintained for this stock. At the beginning I could buy only 15 shares of this stock, but over time as MA was falling, my buy order was trailing the price and I could buy 16 shares cheaper:

 

02/04/2014 20:02:24 If the last of MA is greater or equal to 75.94
Buy 15 MA at limit $75.94


02/05/2014 20:34:52 If the last of MA is greater or equal to 74.63
Buy 15 MA at limit $74.63


02/05/2014 22:20:39 If the last of MA is greater or equal to 74.27
Buy 15 MA at limit $74.27


02/06/2014 10:44:30 If the last of MA is greater or equal to 74.27
Buy 16 MA at limit $74.27

The last order was fired and executed.

 
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Of course I could buy cheaper if I bought yesterday when the price dropped to 72-ish level, but when using conditional order, you want to set up a bit higher price to give the stock a wiggling space. In that case you make sure you won’t get executed and the stock continues lower and making you a losing position. With higher strike price, there is a better chance that the stock reversal is not a fake and that the stock will continue up.

 
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Of course, it is not bullet proof strategy, but it can save you a few buck by buying cheaper.

And of course, I released cash for this trade by selling my RWX commission free savings as you can read about here. At first I had a dilemma which stock to buy, you can read about it here, but then I made a choice to go with MA this time. My next purchase will be a high yield dividend stock.
 
 





2 responses to “New trade – MasterCard (MA) buy long stock – building my ROTH”

  1. This trade could have the potential for great returns. Both V and MA are great investments, imo. As you mentioned, they arent much of dividend payers, but they are growing fast!

    I wonder if the current weakness is because of new payment methods and technology – such as Paypal, Google Wallet, Bitcoin, etc. Still a great long term play, I think.

    Best wishes

    R2R

    • Martin says:

      R2R, I don’t think those new technologies can endanger Visa or MasterCard. For example Paypal works well over the internet, but if you want to use Paypal in a store, gas station, or elsewhere, you need a plastic. And guess whose plastic Paypal issues to you? Even if you want to pay thru Paypal you use either directly your checking account or credit card (again Visa or MasterCard), if you want money from someone who doesn’t have a Paypal account a credit card is used… MA and V make money on every such transaction.

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