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What Is The State of MasterCard and Consumer Debt During Trump Era

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MasterCard Donald Trump Consumer Debts

Previously known as Interbank Card Association, MasterCard is a group of banks. With Trump’s economic policies and infrastructure spending, how will MasterCard’s stock value fare? Read on to find out from Mr. Malcolm Berko.

MasterCard and Consumer Debt

Dear Mr. Berko:

My brother, who does well in the stock market, told me to buy 100 shares of MasterCard.

He thinks that President Donald Trump’s economic policies and infrastructure spending will grow corporate earnings and give more people jobs and many people higher-paying jobs. He says that these people will spend their money rather than save it. We both believe that the American consumer is born to spend. Please advise. — JA, Indianapolis

Dear JA:

I think your brother is right as light!

Way back in 1966, before marijuana became legal in the Western states, a group of banks formed the InterBank Card Association. And in 1968, when the movie “Planet of the Apes” was released, this association changed its name to MasterCard. In 2006, Goldman Sachs, Citigroup and HSBC took MasterCard (MA-$178) public at $39 a share. And in December 2014, just before Russia annexed Crimea, MA had a 10-for-1 split.

Back in 2007, a stockbroker with whom I occasionally exchange ideas told me to buy MA, which was trading at $46 a share. I wasn’t comfortable with his analysis. I was convinced that consumers had maxed out their personal debt (credit cards, small-loan companies, cars, student loans), because in 2007, they owed a record $10.6 trillion. And that year, the gross domestic product was $14.4 trillion. Those were staggering numbers, and I couldn’t imagine that consumer debt would stagger higher. Well, it did stagger higher. Ten years later, consumer debt had risen to $13.8 trillion, a $3.2 trillion increase, while the GDP had risen to $19 trillion, an increase of $4.6 trillion. I figured that the fit had to hit the shan sooner or later. That 30 percent increase in consumer debt between 2007 and 2017, without an equal increase in consumer income, gave me agita.

I should have bought the darn stock! During the past 10 years, MA’s revenues have grown by 350 percent. Cash flow has increased by 550 percent. Share earnings have boomed by 625 percent. And the dividend, though it’s still cheeseparing, has grown from a nickel to a dollar a share. MA is a global leader in electronic payments and has become the processor, franchisor and adviser to over 25,000 financial institutions in support of their credit, debit and other payment plans. Today MA licenses or franchises its credit card brands (MasterCard, Maestro, Cirrus) to customers all over the planet, with the exception of North Korea. I’m told that Visa (V-$124.71) has a better chance of success in North Korea than MA.

This year, with the help of 12,000 mostly happy employees, MasterCard expects to increase revenues from $12.2 billion to $13.9 billion. That certainly ain’t chopped liver. And with impressive net profit margins of 38.1 percent, management expects to report earnings in 2018 of $5.08 a share (up from $4.45 in 2017), with an increase in its miserly dividend to $1.10.

Too many American consumers are drunk on debt. And as long as they can make monthly payments, it appears that American consumers are still willing to take on more debt. Americans would own kangaroos as pets if they could be bought for $100 down and $50 a month. As employment continues to improve, as the economy continues to pick up steam, as corporate billions come in from overseas, as corporate America continues to improve earnings and grow dividends and as Trump’s economic initiatives gain traction, consumers’ borrowing appetite will push MA’s revenues, earnings and dividends nicely higher during the coming four years. By 2021, MA’s revenues could improve by 40 percent, to $18.5 billion. Earnings could improve by 43 percent, to $7.10 a share. And the dividend could run up 25 percent, to $1.27. And best of all, MA’s net profit margins will probably improve to 40 percent.

However, since December 2015 — when MA was trading in only the mid-$80s — insiders, officers and directors have been selling the stock as the shares have been running up. I wonder why, because Credit Suisse, Argus Research, Market Edge, Zacks, KeyBank, Piper Jaffray, Morgan Stanley and others have “buy” rankings on MA.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at [email protected] To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
COPYRIGHT 2018 CREATORS.COM

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    ponthida

    March 30, 2018 at 12:10 PM

    the way of increasing appetite, it will bring back food from ……. traffic will improve your initiative probe

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Franchises

Tech-Driven Fitness Franchise Set to Disrupt The Industry With Zero-Staff Model

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MyFit18 announced this week the launch of a first-of-its-kind, truly zero-staff fitness franchise opportunity that entrepreneurs manage remotely – from the comfort of their home or the other side of the country. Bucking industry trends, MyFit18 is betting that its technology-driven, low-overhead, and completely personalized gym ownership model will put gym ownership within reach for fitness professionals and entrepreneurs alike.

As a new player in the highly competitive fitness franchise space, the brand is already making its mark with its proprietary app-driven model, which contributes to the low startup fees for prospective franchise owners. MyFit18’s app serves as a bridge between owners and members, allowing members to get a free trial, enroll, gain 24/7 access, submit feedback, or stop their membership with a few taps, eliminating the need for on-site staff. Turnkey digital marketing, support, and automation tools – along with a no-pressure, customer-friendly sales approach and caps on memberships to prevent overcrowding – enable owners to attract and retain members.

“We created MyFit18 to provide a gym ownership opportunity to fitness professionals and entrepreneurs who want to make a positive impact on people’s lives, without the exorbitant cost and daunting operational workload,” said Marty Flanagan, Vice President of MyFit18. “We’re going against the grain of a typical fitness franchise opportunity and have given total freedom to our owners, allowing them to put a personalized touch on their business, and to run it from anywhere. We truly believe we have something unparalleled here.”

MyFit18’s business model reflects the brand name, with monthly membership dues starting at $18 per month and 18 pieces of standard equipment at each center. Beyond MyFit18’s minimal buildout requirements and branding, the franchise owner has liberty to fully personalize their center with additional equipment and gym offerings to cater to any fitness niche they are passionate about.

“Fitness centers cannot be replaced by automation; it can only be enhanced by it. With the MyFit18 app, we’re paving the way with automation-centric fitness while still offering consumers a more flexible fitness experience that they want and need,” adds Flanagan. “Our members are looking for convenient place to get fit – they don’t need a tour or high-pressure sales. With a completely personalized, affordable experience, we are setting a new standard among fitness concepts.”

MyFit18 is actively seeking qualified single and multi-unit franchisees with a passion for fitness and entrepreneurship, who exhibit dedication to inspire and encourage gym-goers to be their best selves. MyFit18 is backed by a support team of highly qualified franchise and fitness experts with more than six decades of experience developing successful franchise brands such as Code Ninjas, the world’s fastest growing kids coding franchise with more than 550 locations open and under development since launching in 2016. The brand offers potential franchisees a unique opportunity to build and personalize their brand and capitalize on a first-of-its-kind concept. With a $15,000 franchise fee, the overall investment to own a MyFit18 is around $92,000.

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Franchises

Westpac Banking Corp Investments

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Westpac Banking Corp Australia New Zealand

Read this article to find out the stock value of Westpac Banking Corp – an investment down under and way up north!

TAKING STOCK
BY MALCOLM BERKO
RELEASE: WEDNESDAY, DECEMBER 6, 2017

Westpac Banking Corp

Investments Down Under and Way Up North

Dear Mr. Berko:

We’re both 73, and like most Americans, we’re starving for yield but scared to reach.

Our neighbor told us he just bought 150 shares of Westpac Banking Corp., an Australian company. We could buy 200 shares if you think the stock, including its dividend, is safe. Also, we are told that Iceland’s money market accounts pay 4.25 percent. What do you think of this? Is this real? — DC, Jonesboro, Ark.

Dear DC:

Australia and New Zealand have an oligopolistic banking system, and Westpac (WBK-$23) is one of the four major banks operating in these two countries.

WBK has a thriving and diversified franchise and a much-envied competitive advantage, as do the other three majors.

This dominant oligopoly produces dominant pricing power, near immunity to competition, low-cost but very profitable operations and easily recognized brands with which the public readily identifies.

In the past decade, WBK’s share price has moved nicely, from $15 in 2008 to $23 today.

Revenues have risen from $12 billion in 2008 to $21 billion today, and net income per share has more than doubled.

Meanwhile, the $1.39 dividend has increased modestly for years, yielding a comfy 5.5 percent.

Considering the payout of other worldly banks, I’d gladly sit still for 5.5 percent — and the dividend may be increased to $1.50 in 2018.

During the past 18 months, WBK has produced stronger than expected earnings, with net profit margins exceeding those in its peer group, which consists of the Commonwealth Bank of Australia, National Australia Bank and the Australia and New Zealand Banking Group.

WBK has better metrics than its competitors, earned by a management team that’s been at the helm for years, superior stewardship and an impressive risk-reward track record. WBK, founded in 1817 with a storefront in Sydney, now has operations spanning the South Pacific, including Fiji, Papua New Guinea and Bali.

WBK does everything that the big U.S. banks do; however, it does it with less fanfare, less braggadocio, less paperwork, less regulation and more honesty. It eschews subprime loans, which U.S. banks fervently seek and cherish. And while management at U.S. banks measures profits and revenues quarter to quarter, WBK’s focuses not on next year or 2019 but long term — 10 to 15 years hence.

In the past few years, WBK has generated impressive operating momentum from its core retail banking franchises with excellent cost and income performance metrics. And with solid economic growth in Australia, WBK’s low-risk domestic business model bodes well for the bank’s consistent growth in the foreseeable future. Growing economies of scale, WBK’s enviable dominance of the market, its brawny balance sheet and a rare AA credit rating give management an effective platform for robust growth — today and years into the future.

Since the end of the global financial crisis, WBK has steadily increased its revenues and dividends (including paying two special dividends in 2013), impressively increased return on equity to 16.4 percent, and raised its capital ratio sufficiently to protect its portfolio in case of another financial meltdown. Conservative analysts believe that WBK could trade at the $28-$30 level in the coming 12 months. That wouldn’t be enough to knock your socks off, but it would produce a respectable total return of 24 percent.

Perhaps that’s why Morgan Stanley, UBS, the Royal Bank of Canada, Northern Trust, Invesco, Bank of America, Deutsche Bank and Bank of New York own WBK shares. And perhaps you should, too.

Iceland’s money market accounts do pay 4.25 percent. Last year, they paid 5.75 percent. It’s liquid as ice water, and some Americans have taken the plunge. However, you must first convert your U.S. dollars to Icelandic kronur. Today’s rate is about 105 kronur to the U.S. dollar, and there’s the risk. If the krona were to remain at 105 per dollar or if it were to rise in value against the U.S. dollar, an investor would come out smelling like a red Icelandic rose. But if the krona were to fall (and it has), an investor could lose his booties and get frostbite. A trip there is preferable to an investment, and if you visit, try the blood pudding.

 

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at [email protected] To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
COPYRIGHT 2017 CREATORS.COM

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