What I Watch in My Stocks, Part 2

Note: This is a continuation of my post from yesterday. Feel free to go read the two introductory paragraphs there if you want to know the purpose of these posts!

Up first today are the four companies in my “War on Cash” basket, which is an idea that I I admit I’m stealing this idea from Jason Moser of The Motley Fool, who calls the “War on Cash” one of the more interesting developments in investing.

Mastercard Incorporated (NYSE: MA) [Earnings – May 2 Before Market Open (BMO] – For Mastercard, the word is CASH. Chances are, we are going to get further removed from using cash in our lives, so companies like Mastercard will benefit because it is their infrastructure that a cashless society will run. Mastercard is the second largest of the four companies, with $186.7B in market cap, $12.5B in revenue and $4.7B in income. This is the longest held of the four “War on Cash” companies that I own, and I plan on holding them for a while.

PayPal Holdings, Inc. (Nasdaq: PYPL) [Earnings – April 25 AMC] – PayPal joins Mastercard with the word CASH. A recent addition to the portfolio, I was simply rounding out the thesis behind the “War on Cash” basket mentioned above. PayPal was spun off from eBay a few years ago, and they have been successful in their own right since being granted its independence. It’s the third largest of the “War on Cash” companies, checking in with a market cap of $95.4B, annual revenue of $13.1B, and income of $1.98B.

Square, Inc. (NYSE: SQ) [Earnings – May 2 BMO] – The smallest of the “War on CASH” companies, Square is also the newest to market of all the holdings. They may be “small” – market cap of “only” $20.4B – and unprofitable – a $63M loss on $2.2B in revenue – but they have a place in my “War on Cash” basket. The long-term hope is that they eventually scale to the size of PayPal, but in the short-term, I’ll be looking for some earnings growth, hopefully into positive territory. Analysts are expecting this to happen, and I plan on holding onto shares as the “War on Cash” continues.

Visa Inc. (NYSE: V) [Earnings – April 25 AMC] – The largest of my “War on CASH” companies joins PayPal in being the first to report earnings from this group. Visa is its sector’s leader in all the important metrics – $18.8B in revenue and $5.8B in net income – and it also boasts the highest market cap ($280.9B) of the four “Cash” companies. Like Mastercard, Visa owns the infrastructure that a cashless society functions, setting them up to truly reap the benefits as we move further away from cash. Unless we all seemingly decide to go back to cash overnight, the “War on Cash” companies will continue to thrive.

The last two companies are barely holding on to their place in my portfolio, but I am willing to commit long-term to them should they reverse some recent trends:

Starbucks Corporation (Nasdaq: SBUX) [Earnings – April 26 AMC] – The word for Starbucks is FOOD. Starbucks is really good at selling coffee, but it is still trying to figure out the food side of its business. Though this is one of the longest-held stocks in this portfolio – and I owned it previously as well – it’s also the stock that I have been closest to selling over the past few months. I don’t necessarily think that the company is performing poorly, though the stock is relatively flat over the past year. They’ve had some very poor public relations issues arise over the past few years, culminating in the arrest of two black men from a Philadelphia location. I will be looking at the food metrics in their earnings this week, but I will also be paying attention to how closing 8,000 stores for bias training affects the bottom line going forward.

The Walt Disney Company (NYSE: DIS) [Earnings – May 8 AMC] – The last of my portfolio companies to report might also be on the hottest seat. The word for them is SUBSCRIPTIONS, as in the number of people that still maintain subscriptions to cable and, more specifically, ESPN. This number has been falling for years as more people cut cable and find other methods of watching their favorite television shows. Live sports was always seen as the thing tethering folks to cable, but with most of the best football and basketball games aired elsewhere, people have realized that they can abandon cable in a traditional sense. The rest of Disney always does well – attendance at its parks is always breaking records, and there always seems to be a Marvel or Star Wars movie in theaters – but the repeatable revenue of ESPN carriage fees has always been a solid foundation of Disney’s earning potential. If those numbers continue to fall, it might be time to finally cut the cord on this investment as well, at least until Disney can show some subscribers for its own streaming service.

I’ll be back later this week with some earnings as indicated for these companies, so feel free to stop on by and check those out when they show up!

Until next time…

I have purchased shares of Mastercard, PayPal Holdings, Square, Starbucks, Visa, and Walt Disney in a portfolio that I manage and continue to hold these shares. I do not intend to sell or purchase any shares during the next 30 days. Feel free to read my full disclosure here.