If there's one thing Motley Fool Answers hosts Alison Southwick and Robert Brokamp enjoy, it's hearing from their listeners, so they particularly relish the monthly mailbag episode. But even they can be overwhelmed by the quantity and breadth of those queries, so this time around, they've invited a couple of friends to help out: serial podcast guest Jason Moser and Answers newbie Abi Malin.
In this segment, they try to help a listener looking for the best strategy among many good ones in the digital payments space: An even split among Mastercard, Visa, Paypal, Square, or just a fintech ETF? Moser, in particular, has a strong view on the subject.
A full transcript follows the video.
This video was recorded on July 31, 2018.
Alison Southwick: The first question comes to us from Jordan. Jordan writes, "I'm trying to decide between owning shares of Mastercard, Visa, Square, and PayPal or one of the following ETFs: Prime Mobile Payments [IPAY] or Global X Fintech [FINX]. If you were to choose individual stocks over the ETFs and you had $10,000 would you put 25% in each stock?"
Jason Moser: Well, you know my answer. I mean, we've talked about the war on cash, before. I'm sure people are probably getting sick of me talking about the war on cash.
Southwick: You're pro war on cash.
Moser: I am pro war on cash. It was so funny. It said something about the war on cash on Twitter one day and in included Square in the conversation. And somebody from Square replied back and they said, "No war. Cash is cool. We just like options." So I don't think they fully knew the backstory and I was going to get into it and show them the returns and stuff like but...
Southwick: So we have hawk in the studio, Jason Moser, and you're definitely pro war on cash, but do you buy individual stocks or do you go for an ETF?
Moser: For me, personally, the point of the basket of stocks that I put together was to give investors the opportunity to have their own little kind of fund and essentially eliminate all other external factors involved, whether that be management fees or churn or whatever funds can tend to present. For me personally, I would and did go with the basket of the four stocks and I think the track record, itself, has done very well. We just celebrated the war on cash's birthday a few days back, and in the first year of existence the basket of stocks returned a total of 80%...
Southwick: Not bad...
Moser: vs. the market's 14%, so...
Southwick: Not bad.
Moser: ...obviously exceeding expectations there. I was going through PayPal's earnings call recently and there was a snippet in the call that really to me summed up why I think this basket works, so I'm going to read a quick quote from PayPal's CEO Dan Schulman to give people an idea of why I think this basket works.
It goes, "First of all, obviously we respect all of our competitors. We learn from them, but we are really focused on our customers and what their needs are. And that's what we pay a tremendous amount of attention to and we feel if we can solve their pain points better than anyone else, we'll continue to win and be a leading platform in the digital payment space. Secondly, I'd say it's obviously not a zero-sum game. We're operating in what we think is a $100 trillion total addressable market."
Now this is to give you an idea of the reason why I think that basket works. One, it's not about picking just one winner. There are going to be many winners. Two, it's a massive market opportunity. I tend to discount that $100 trillion just to be a little bit more conservative, but the point still remains that this gives you excellent exposure of two companies that are really guiding the way there. For me, I'm going war on cash over the funds 10 times out of 10.
Robert Brokamp: And would you split up the investment equally?
Moser: Yes, and that was the point of the basket, was to keep it simple and just do 25% in each holding. It doesn't mean you can't add to positions as time goes on and find the companies that perhaps are outperforming and build those positions up a little bit more over time. You can just continue to add to them equally, but I think it really works and I think it's going to be something that lasts for a long time.
Southwick: Do you think we perhaps made the mistake with this question but Jordan heard Jason on another show talk about this and then he wanted a second opinion? But instead of getting a second opinion he still put that to Jason.
Moser: We're just hammering the point home here.
Southwick: Jason Moser. Several weeks ago Jason Moser said that you should buy these four stocks. Do you agree that that is still the right way?
Brokamp: Does Jason Moser know what he's talking about?
Moser: And let's be clear here. A lot of this depends on the individual investor's risk tolerance. Coming from my perspective, I would say I had a much higher risk tolerance vs. other people who may not have quite as high a risk tolerance.
There's no question that this basket of four stocks is more concentrated than most funds out there, and that's going to be the nice part of having a fund is it will be more diversified. Probably less volatile. Perhaps that caps the returns. Maybe the basket of stocks outperforms because it's a bit more concentrated. You have to weigh that and it's going to be different for each individual investor.
Southwick: But bottom line Jason Moser agrees with Jason Moser.
Moser: Well, of course. As always. But I also think the bottom line is that this payments market opportunity is tremendous, I think it's long-lasting, and I think it's one that every investor needs to have exposure to.
Abi Malin owns shares of Mastercard and Visa. Alison Southwick owns shares of Visa. Jason Moser owns shares of Mastercard, PayPal Holdings, Square, and Visa. Robert Brokamp, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Mastercard, PayPal Holdings, and Square. The Motley Fool owns shares of Visa and has the following options: short September 2018 $80 calls on Square and long September 2018 $55 puts on Square. The Motley Fool has a disclosure policy.