It's not a surprise that Warren Buffett, who many consider to be the greatest investor ever, is watched closely by most stock market participants. Investors comb over Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) quarterly 13-F filings to see what changes were made to the portfolio. The hope is to find a new winning stock idea. 

As of Dec. 31, 2022, the portfolio of Buffett's conglomerate is concentrated at the top in five well-known names: Apple, Bank of America, Chevron, Coca-Cola, and American Express. These get a lot of the attention. But the one company I have my eye on only constituted 0.4% of the portfolio at the end of last year. 

To be clear, Buffett's Berkshire Hathaway owns a lot of stocks, but here's why I'm most excited about Mastercard (MA 0.88%).  

Mastercard operates a first-class business model 

Many financial services businesses are dealing with a new reality that's far removed from what they've experienced for most of the past decade. These days, higher interest rates are normal, and many banks will see higher defaults and tighter borrowing standards. Mastercard is immune to all of this. Since it doesn't lend money, it isn't exposed to credit risk or interest rate risk. This is advantageous, as Mastercard isn't as cyclical as traditional banks.  

I've written before about the specifics of Mastercard's business model. But what I want to reiterate is that this is really just a communications platform that connects the various parties of a transaction, collecting a fee every time one of its cards is swiped. This lucrative operating model leads to incredibly high net income margins, which have averaged 40% over the past 10 years. 

Even more exciting for shareholders, this business is a natural hedge against the high inflation we've been seeing for nearly two years now. If customers have to pay more for basic items like food or gas, or even for discretionary purchases like a new pair of shoes or home furnishings, and if they use their Mastercard, the company will benefit by generating greater fees. 

2022 was a solid year for the company. Mastercard's net revenue of $22.2 billion and diluted earnings per share (EPS) of $10.22 were up 17.8% and 16.7%, respectively, year over year. And more recently, as travel demand remains quite strong, Mastercard's cross-border volume fees jumped 30% in the fourth quarter, momentum that carried over through the month of January. 

Mastercard processed almost $8.2 trillion of gross dollar volume last year, and it has 3.1 billion cards outstanding, a massive number that shows the company's scale. As long as these figures go up over time -- and they should as the world transitions away from cash-based transactions -- the business will continue thriving thanks to its toll-booth characteristics. 

Mastercard's valuation might be justified 

Over the past five years, Mastercard shares have climbed 108% (as of April 13). This performance trumps the broader market indices by sizable margins. However, this impressive gain has resulted in the stock trading at a price-to-earnings (P/E) ratio of 36. This valuation might be cheaper than the stock's trailing five-year average P/E multiple, but it is meaningfully more expensive than Mastercard's chief rival, Visa, which trades at a P/E of 32. 

Mastercard's premium relative valuation might be justified, though. Consider that over the past decade, the business has registered faster average annual revenue growth than Visa. And thanks to Mastercard's smaller size, it simply has a bigger expansionary runway to gain market share.

Looking ahead, Wall Street consensus analyst estimates call for the company's revenue to increase at a compound annual rate of 12.2% between 2022 and 2027, with diluted EPS rising at a 15.7% annualized clip. Visa is expected to see outstanding growth as well -- just not at the level of Mastercard on either the top or the bottom lines. 

Through Berkshire Hathaway, Warren Buffett certainly owns a lot of stocks. But in my opinion, it's hard to be excited about any of them more than Mastercard.