Visa and Mastercard, quality compounders at a very reasonable price.

Visa and Mastercard have both drawn down recently, around 10% each this year and apart from the 'Liberation Day" sell off last April, they are at a 52 week low. The market has always ascribed them a high P/E (around 30), due to their solid growth, durable business, free cash flow and earnings per share. They were the definition of a blue chip stock and a core holding to any portfolio. One that even Buffet not regretting more of ("If we all had a crystal ball"). Like all large businesses they face regulatory scrutiny, competition and new players constantly. It's well covered that even if interest rates are limited on credit cards (which seem a very remote possibility, barring a few headlines there has been no movement on that) it will not affect them at all. The main risk is they are facing pressure on interchange fees. This is nothing new. It's not like the merchants suddenly decided recently to try and lower their fees. It also misunderstands the percentage that Visa / MA gets. They get around 10% of the fee. The issuing bank gets 70-90% (the "Interchange fee). Any cutback would most likely come from the banks fee. VISA / MA get a "assessment fees" or "scheme fees". The amount VISA / MA get is very small, the public / merchants just believe "Visa take 2%" as they see their name on the card when they pay. It's more like 0.1 to 0.15%. This network is very hard to replicate. ApplePay uses the Visa Network. It's safe, fast, reliable and robust - VisaNet can handle 65,000 transaction messages a second. One way to think of it is Visa / Mastercard own the railway tracks. Other companies run their trains on them. Rebuilding railways tracks is hard and expensive. (Thanks to the Reddit below for this idea). VISA / MA can't really charge any less and are very unlikely to do so. They make money because they handle a huge amount of transactions (around 1.5 billion a day). Their business plan is like the saying "if I had 1 cent every time ...). They would be much more affected by a slow down in customer spending, as would the whole market. Both are aggressively buying back shares, increasing their dividends and are projected to grow at double digits. Listening to their last earnings call they are well aware of changes in technology and are adapting / testing them to see what will improve their business. At a forward P/E of 26.5 for MA and 24.5 for V the market is giving a real discount on two quality compounders with many years of growth ahead.