MasterCard Profit Rises 70 Percent as Card Purchases Increase

MasterCard Inc., the second-biggest
U.S. credit-card company, said profit climbed 70 percent to a
record as consumers charged more purchases.

First-quarter net income rose to $214.9 million, or $1.57 a
share, compared with $126.7 million, or 94 cents per share, a
year earlier, the Purchase, New York-based company said today in
a statement. MasterCard was expected to earn $1.16 a share, based
on the average estimate of 12 analysts surveyed by Bloomberg.

MasterCard shares have tripled since Chief Executive Officer
Robert Selander took the company public a year ago, capitalizing
on consumers' growing preference for credit and debit cards over
cash and checks. Earnings have also jumped at Visa International
Inc., the world's biggest credit-card company, which said last
year it will go public as well.

``We are bullish on the long-term prospects for
MasterCard,'' analyst Timothy Willi of A.G. Edwards & Sons Inc.,
which rates the stock ``hold,'' wrote in a note to clients this
week. ``Consumers, businesses and government are making cards
their preferred method of payment.''

Revenue rose 24 percent to $915.1 million, while expenses
climbed 8.2 percent to $601.2 million.

MasterCard credit- and debit-card spending increased 16
percent to $509 billion on a local-currency basis, and
transactions jumped 19 percent to 4.2 billion, the company said.

Cash and checks fell from 77 percent of U.S. consumer
payments in 1995 to 50 percent in 2005, while cards rose from
around 21 percent to 40 percent during that period, Willi at A.G.
Edwards wrote in an April 30 report to clients, citing data from
the Nilson Report in Oxnard, California. Nilson estimates that by
2010, card-based payments will account for around 56 percent of
consumer payments, while cash and checks will be down to around
29 percent.

``During the past 10 years, card-based payments have
aggressively displaced paper-based payments,'' Willi said.

Profit Margin

Shares of the company slid 9.7 percent on Feb. 9, the
biggest drop since MasterCard went public, after Selander
declined on a conference call with analysts to forecast continued
growth in profit margins. They rose $3.17 yesterday, or 2.8
percent, to $114.85 in composite trading on the New York Stock
Exchange.

A lawsuit accusing MasterCard of anticompetitive behavior,
brought by rival card networks American Express Co. and Discover
Financial Services, ``could put downward pressure on shares,'' as
could the expected initial public stock offering of Visa
International, according to analysts at JPMorgan Chase & Co.

The lawsuit is scheduled for trial in federal court next
year.

MasterCard in April 2006 began charging card issuers for all
foreign transactions using U.S.-issued cards. It used to assess a
fee only if it converted the related currency to U.S. dollars.

To contact the reporter on this story:
Joseph N. DiStefano in New York at
.

American Express Launches Gift Card Campaign

American Express says it is experiencing growing customer demand for year-round gift-card giving. In fact, the company says, last year alone it sold more gift cards than in all previous years combined.

With that in mind, it is launching three special occasion gift cards to help boost gift-card spending outside the holiday season, MediaPost. The Especially for Movie Lovers Gift Card is being launched in support of the sixth annual . There is also a card specifically geared toward dining out and one for bride and groom. Cards are $1 off when purchased online between April 25 and May 31.

American Express has replaced its "My life. My card," slogan with a new campaign that asks, "Are you a cardholder?"

Wally Weitz on Washington Mutual (WM), American Express (AXP), UPS (UPS) and TD Ameritrade (AMTD)

left;">Wally Weitz’s commentaries on some of the stocks he just bought or sold: Washington Mutual (WM), American Express (AXP), UPS (UPS) and TD Ameritrade (AMTD) etc.

Wally Weitz, known as the other Oracle of Omaha, had a good year. For the 12 months ended on March 31, his Value Fund and Partners’ Value Fund returned more than 18%, and the more concentrated Hickory Fund 16.6%. For reference, S&P500 gained 11.8% in the same period. Over the past 20 years, his funds outperformed S&P500 by more than 3% per year. These are some of his commentaries on his recent buys and sells.


Washington Mutual (WM) -- Sold
We first bought Countrywide Financial and Washington Mutual (WaMu) in the early 1990’s. Countrywide has gained market share through internal growth and very efficient operations. Washington Mutual grew through acquisitions, and while it was not as strong as Countrywide from an operating perspective, it grew steadily and treated shareholders well with a combination of generous dividends and stock buybacks. Both have been very good investments for us. We sold our WaMu in the first quarter of (calendar) 2007 because of its exposure to subprime and Alt-A (what some refer to as "the mysterious middle ground between subprime and prime") and because we had less confidence in management’s ability to successfully cope with a crisis in the mortgage industry.


UPS (UPS) -- Buy
UPS is another wonderful business that we have admired for a long time. UPS dominates the U.S. ground parcel market and has a growing global transportation and logistics network that would be nearly impossible for a new entrant to replicate. The company continues to invest in that network (at high rates of return) to help cement its competitive advantage. The stock has declined lately due to a temporary slowdown in earnings, and while not quite cheap enough to take a full position, we have bought a modest number of shares and are hopeful that near-term economic weakness may give us the opportunity to buy more.

TD Ameritrade (AMTD) -- Buy
TD Ameritrade is a leading online discount brokerage firm based in Omaha. Their recent merger with TD Waterhouse helps diversify their business, adds meaningful scale, and provides the opportunity for significant cost savings in consolidation. We believe the stock is very cheap based on post-merger earnings power.

Dell (DELL) -- Buy
Dell is a direct marketer of computers and other electronic equipment that we have discussed in previous letters. Our bet is that Dell’s self-inflicted problems are fixable and that its highly efficient business model is not broken.

Apollo (APOL) -- Buy

Apollo is a leader in for-profit higher education. Apollo’s (and its peers’) earnings growth rate has slowed, but it still generates a growing stream of free cash flow which it can use for expansion and share buybacks. We believe that Apollo sells at a discount to its private market value. We would be happy to own it for many years and to participate in the growth in the value of the business, but the company might also find its way into a private equity portfolio at a healthy premium to its current price.
Mohawk (MHK) and USG (USG) -- Buy

Mohawk and USG (formerly U.S. Gypsum, when companies had names that meant something) are building materials companies that hold dominant positions in their industries (flooring and wallboard, respectively). Both are diversified among new home, remodel, and commercial construction markets, but are clearly cyclical businesses. Their stocks are depressed because of the current slowdown in residential construction and fears of a recession that would affect commercial construction. Both have demonstrated the ability to earn high returns and increase market share over the course of a business cycle.

American Express (AXP) -- Buy

American Express returned to our portfolios this year. Amex is a great business with a dominant payments franchise, a wonderful consumer brand, and an entrenched competitive position. The business earns over 30% on equity, has high-return reinvestment opportunities and returns substantial amounts of cash to shareholders through dividends and share repurchases.



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