Bill Ackman Just Bought Mastercard Stock! Here's Everything You Need to Know.

We have some breaking news over the last couple of days. Wall Street legend and billionaire Bill Aman just revealed a few of the stocks he recently added to his portfolio. And he released an in-depth 30page paper breaking down exactly why he added these positions to his portfolio. And while there's obviously plenty of takeaways, one thing was really interesting. Bill Aman added four financial stocks. He went heavy into financials like Visa, Mastercard, ICE, and S&P Global. Now, I've been keeping up with Bill Aman for a long time. And about 8 months ago, Bill Aman went on to Fox Business and revealed that he was getting ready to add a new stock to his portfolio. And based on the information he told us in that interview, I predicted in this video right here that he would either be adding Meta or Mastercard to his portfolio. I'm going to go ahead and play that interview right now. It >> It sounds like you're bullish going into the new year. Are you poised to put new money to work in equities going into 26? >> Yeah, look, I think it's been an interesting market. You've had some enormously successful companies have generated huge returns this year. You've had a lot of stocks that are down a ton. So I think it's a very good market for stock pickers. You know, we're very concentrated investors and we're seeing some very high quality businesses showing up at very attractive prices. Uh and so I, you know, we'll absolutely be putting money to work. We've actually got um you approaching 15% cash and we're looking at a number of very interesting things. >> So what would it take for you to put that 15% cash to work? A big sell-off? No, just uh finishing our due diligence on a company we really have wanted to own for years now available at a bargain price, you know, something like that. >> So, I saw the interview, predicted he was either buying Meta or Mastercard, and just a few days later, it was revealed he did indeed Meta to his portfolio. Based on what I knew about Bill Aman, I felt pretty confident it would be one of those two positions. But what's interesting now is we also see that he has indeed added Mastercard to his portfolio. So naturally, we need to answer a couple of questions. Why did he add Mastercard? Why did he go so heavy into these financial stocks that are essentially very capital-like toll roadlike businesses? These aren't your traditional finance stocks. They're nothing like banks. Now, here's what we need to understand about all four of these businesses. If we take a look at their returns over the last year, every single one has significantly underperformed the market. Now, Visa's up about 5.2%, 2%. But that's really the only position that's positive over the last year. Mastercard is still down by 3%. ICE down by 16% and S&P Global down by 26.16%. And if we look at them year-to- date, it's really not that much more impressive. Mastercard is essentially flat. Visa up about 4.2%, ICE down four, and S&P Global down by 19%. Now, what Bill Aman wisely points out in this long document that he puts out, 30 pages, is we need to be looking closely at the potential sources of returns when we think about the investments we're making. Now, this is something I've talked a lot about in the past and definitely over on dividendology.com. But one of the things we always have to do is understand there's three potential sources of return for any investment. It's the dividends being paid out, the earnings growth, as well as the change in the valuation multiple. And each of these are very different in nature. For example, when you look at the dividend, you can see dividends are essentially positive every single decade when looking at the sources of return for the S&P. The same is certainly not true for earnings growth and definitely not multiple change. We can see there's decades where earnings growth is negative, decades where the valuation multiple is negative. So dividends are very predictable. They grow year-over-year. They're more defensive in nature. But when you're talking about actual market outperformance, you need earnings growth and multiple change working for you. This is why I call earnings growth and multiple expansion the engines of outperformance. So let's look at a simple example. If we jump over to a spreadsheet that is known as Bogle's valuation, all we're really doing is looking at investment through the lens of sources of returns. Now, it's slightly different, but it's essentially the same concept. We're looking at the earnings growth of the stock, the shareholder yield, which is going to be the dividend yield plus buyback yield, and then multiple expansion. What we can see in the case of Mastercard, if we start with shareholder yield, is their dividend yield is low. It's about 0.6%. Now, keep in mind, historically, they have been a phenomenal dividend grower, exceptional dividend growth with a 10-year dividend kagger of 16%. Now, real quick, like always, if you'd like to download any of these spreadsheets and also get access to the ticker data add-on in Google Sheets that allows you to automatically import stock financials into your spreadsheet, then be sure to check out ticker data at the link in the description. But again, the point is Mastercard has been an incredible dividend grower. Now, with that being said, if we also account for their share buybacks, their shareholder yield is sitting at about 3%. They bought back 3% of their outstanding shares in 2025. Extremely impressive. So with that being said, their expected return would already be sitting at 3% without accounting for any change in the valuation multiple and without any change in earnings growth. But what do we know about Mastercard? Well, Mastercard grows earnings at a high rate. In fact, if we go ahead and jump over to our sensitivity analysis, come up here and plug in Mastercard. One of the cool features of ticker data is you can automatically import the estimated EPS average from analyst over the next few years. And Mastercard has a projected EPS kagger of 15.3%. So that's very rapid earnings growth. So let's take that into consideration for a moment when looking at Bogle's valuation. Assume they actually pull off 15% earnings growth. What you're looking at 15% earnings growth, shareholder yield of 3%. All of a sudden your expected return is sitting at 18% without any change in the valuation multiple. So you're talking about very potential strong returns and this is exactly what he highlights. We expect the principal driver of our portfolio company stock price performance to be earnings per share growth they deliver due to their high growth rates and long-term sustainable competitive advantages which serve to preserve and enhance their market position. While in the short term earnings per share growth does not guarantee higher stock prices, over the long term we expect long-term growth in EPS and economic earnings to drive increases in the intrinsic value and stock prices of our holdings. So he points out something extremely important in the short term. What changes the stock price? Well, it's changes in the valuation multiple. It takes time to grow earnings at 15%. Even if it grows 15% over the next year, in the short term, over the next week, we could see a 10% decline in the valuation multiple, which of course ends up leading to negative expected returns. But what he wisely points out is that in the long run, it's earnings growth that pushes share prices higher. This is why essentially anytime you look at a stock like Mastercard that has exceptional long-term performance, take a close look at what their earnings per share and free cash flow per share growth looks like. Earnings per share was sitting at $3.36 in 2015. By 2025,1655. What do you notice about these numbers? Earnings per share grew by approximately 5x during this time period. Look at the share price. Essentially a 500% increase. The stock followed the earnings growth of the company. So yes, in the short term it's changes in the valuation multiple that impact the stock price, but in the long term it's rising earnings per share. Now, this actually makes a lot of sense because when we look at the share price of the stocks that Bill Aman mentioned he's buying, yes, they're all down by a decent amount in the last year, but that's not due to drop in earnings growth. It's due to a change in the valuation multiple. What we're looking at here is the PE multiple for all four of these stocks. Every single one is sitting at a PE multiple that's quite a bit lower than its 5-year average. Now, let's again let's take a closer look at Mastercard all by itself. What we can see here on ticker is 5 years ago at one point the PE multiple for Mastercard was sitting at 39. They were trading at 39 times earnings. Now obviously we could sit here and debate whether or not that's justified. That's certainly a very high premium, but even then the average PE multiple for Mastercard was 31.42. It was just a couple of months ago that the PE multiple got all the way down to 23.6. Now, one of the things we have to keep in mind is, yes, Mastercard has seen a bit of a runup, particularly in just the last couple of months, as we can see right here. But with Bill Aman revealing his purchases, these would have been purchases that were made during Q2. Basically, from April, May to June, which we can see was putting them in the low $500, high $400 share price range, which ironically enough, if you've been keeping up with my portfolio updates, you know Mastercard was a stock that we added just a few months ago as well. We're up about 15% on this position already because ironically enough, we also added during Q2 of 2026. So, a little confirmation bias from successful billionaire investors never hurts. But what Bill Aman wisely realized is both of the engines of outperformance are now working for Mastercard. We now have a stock that will potentially see exceptional earnings growth moving forward and the potential for multiple expansion. So for example, if we see a 20% increase in the valuation multiple over the next decade, that's about 2% a year. When you combine earnings growth, shareholder yield, and multiple expansion, your expected returns are just astronomical. They are extremely strong. If we take a more detailed look at this and simply run it through our sensitivity analysis, again, assume EPS growth of about 15% and assume that the PE multiple, which by the way is still at about 18% discount to how it's historically traded, you're talking about compounded returns of 15 to 16%, not including dividends over the next 5 to 6 years. Now again, we focused on Mastercard, but it's worth pointing out that all four of these companies, while there's definitely some major differences, particularly with ICE and S&P Global, are very capital-like businesses that generate high levels of return on invested capital. Why is that so important to understand? Well, look at Mastercard. When you look at return on invested capital, you can see it's just exceptional. Anywhere from around 48% to around 33% over the last few years. What does that actually mean? Well, it means the returns that the company gets from reinvesting back into the business are extremely high. Now, there's a few reasons we could point out as to why this is, but this can really only be completely understood by looking at stocks through the lens of capital allocation. This is one of the most important things all investors must understand. I point it out all the time. How can a company allocate their capital? How can they allocate their free cash flow? They can either reinvest back into the business, attempt mergers and acquisitions, pay down debt, do share buybacks, or pay out dividends. So, we can actually kind of back into exactly how Mastercard is using their free cash flow. We already know when we look at the dividend breakdown sheet, they used about 16% of their free cash flow in 20125 to pay out dividends. So, let's just make a little note of that on our capital allocation. Now, just note 16%. We're working with rough numbers here. How much did they do in share buybacks? Well, again, we can get a little insight because we were just looking at Bogle's valuation, and we can see they reduced their shares outstanding from 2024 to 2025 by about 3%. Now, obviously, the price these share buybacks were performed at matters substantially, and there's no exact way to know where they were buying back these shares, but assuming they bought them back roughly at an average share price of about $500 per share, and seeing that they bought back 28 million shares outstanding, let's run the math. When we run the math using the very fancy valuation model that I created, what we can see is 28 million * 500, they used about $14 billion of free cash flow to buy back shares. Now, put that into perspective to how much free cash flow they generated in 2025, which was 16.9 billion. So, 16.9 billion. We'll write that down in our model. And then here's the math we need to do. What percentage of free cash flow was used to buy back shares? It would have been around 82% close to 83%. So, if we jump back over to our capital allocation sheet, all of a sudden, what we can see is Mastercard used essentially all of their free cash flow to buy back shares and pay out dividends. Now, sometimes that's a major red flag, but not in the case for stocks like Visa and Mastercard. Why? Well, it's because these are companies that can see exceptional growth happen with very little reinvestment back into the business. They're benefiting from secular tailwinds. What does that actually mean? Well, it means more people are starting to use credit cards. There's more online payments taking place. They're going to benefit from agentic commerce. Very soon, you'll be able to tell your AI agent of choice to book you a flight and trip to New York City. It's going to handle everything. It's going to book your rental card. It's going to book your flight. It's going to book your hotel. And Mastercard has the infrastructure in place to make this happen already. They already have the fraud prevention in place. So again, they need to reinvest very little capital back into the business, meaning it's very easy for them to actually generate high returns on invested capital because they really don't reinvest a whole lot back into the business. So again, a lot of these companies are different in nature, but they certainly fall under the criteria of stocks that Bill Aman looks for, which of course is obvious. That's why he added to his portfolio, and it's something I recognized eight months ago. He even noted in his letter to shareholders that the annual returns the investments generate will be primarily driven by two factors. the growth of EPS in the business and the change in the earnings multiple, the valuation multiple. So again, he's looking at things through the sources of returns. He realizes if he can find stocks growing EPS at a high rate while also trading at a PE multiple that's below what's a fair multiple, then what happens? He can benefit from both of the sources of outperformance, the engines of outperformance. So I added Mastercard to my portfolio in the exact same range that Bill Aman did. And yes, it's already seen a little bit of a bounce up as we pointed out. It's up about 15% in my personal portfolio, but it's still trading well below its historic valuation multiples while still having very high levels of projected EPS growth through the year 2030. So there you go. That's the breakdown particularly of why Bill Aman added Mastercard to his personal portfolio, but it's clear he sees these same types of advantages across all four of these stocks, Visa, Mastercard, ICE, and S&P Global. So hopefully this video was a good breakdown of what's going on in the mind of Bill Aman. But of course, if you want a more in-depth breakdown, just read the letter to shareholders for yourself. You'll learn a whole lot. And looking closely at these types of documents was exactly how I was able to predict 8 months in advance what are the stocks he's going to add to his portfolio. And then again, like always, if you'd like to download any of the automated spreadsheets that you see in the videos and get access to automated financial data in your spreadsheet, then you can head over to tickerdata.com at the link in the description. So, with all that being said, thank you guys so much for watching and please don't forget to like and subscribe to the