Berkshire’s Payment Holdings: A Cautious Assessment

The portfolio of Berkshire Hathaway, a sum exceeding $324 billion in publicly traded equities, naturally attracts scrutiny. Much attention falls upon the larger holdings – Apple, American Express, Coca-Cola – those names that dominate the headlines. However, a more discreet examination reveals smaller positions, often in established businesses, that may offer a different kind of appeal. This report concerns two such holdings: Visa and Mastercard.

These companies, representing a combined 1.5% of Berkshire’s total equity holdings as of February 4th – $2.7 billion in Visa shares and $2.2 billion in Mastercard – are not insignificant, despite their relatively modest weighting. The temptation to dismiss them on that basis would be a mistake. They are, in essence, toll collectors on the vast highway of commerce, and that is a position of considerable power.

The strength of Visa and Mastercard lies in their network effect. Billions of cards are in circulation globally, accepted at over 150 million merchant locations. This ubiquity creates a self-reinforcing cycle: the more merchants accept these cards, the more valuable the cards become to consumers, and vice versa. To attempt to replicate this established network would be an undertaking of immense complexity and cost – a barrier to entry few could realistically overcome.

Despite the proliferation of alternative payment methods – the constant stream of innovation from fintech enterprises and the uncertain promise of stablecoins – Visa and Mastercard continue to deliver robust financial results. Over the past decade, both have consistently registered double-digit growth in both revenue and diluted earnings per share. This is not merely a matter of luck, but a testament to the enduring strength of their business model. It suggests a degree of resilience that many newer ventures can only aspire to.

To call these companies “safe” stocks is not to imply they are immune to all risk. It simply acknowledges the formidable competitive advantages they have built, advantages that are exceedingly difficult to dismantle. This offers a measure of comfort to investors, a reassurance that their capital is not exposed to undue peril. It is a quality that should not be underestimated in the current climate.

A Question of Outperformance

While Visa and Mastercard have outperformed the S&P 500 over the past decade in total return, their performance has lagged the benchmark over the last five years. This recent deceleration may be a harbinger of future returns. It would be unwise to assume that past success guarantees continued outperformance.

The growth prospects remain durable, fueled by the ongoing shift towards cashless transactions. There is still considerable room for expansion, particularly in developing economies. However, investors should not anticipate that these companies will deliver extraordinary returns. The low-hanging fruit has largely been harvested.

Valuations have moderated somewhat in the past twelve months, though they remain elevated. Visa’s price-to-earnings ratio of 30.9 is marginally lower than Mastercard’s multiple of 32.9. These are not cheap stocks, and a degree of caution is warranted. Nevertheless, they offer a solid foundation for a portfolio, a degree of stability that is increasingly valuable in a volatile world. They are not likely to make anyone rich quickly, but they may help to preserve capital over the long term.

2026-02-08 15:53

A Question of Outperformance

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