Pershing Square buys $3.3B in Visa, Mastercard, S&P Global toll collectors

Pershing Square disclosed new stakes of about $1.1 billion each in Visa, Mastercard, and S&P Global as of June 30, totaling roughly $3.3 billion.

The three positions accounted for about 17 percent of Pershing Square's $19.5 billion U.S. stock portfolio, according to the fund's 13F filing submitted in mid-August. The combined allocation exceeds any single position in the fund's 14-company portfolio, including its largest holding, Uber Technologies, at about 13 percent. The move is notable for a fund that rarely opens new positions.

Visa came in at about $1.1 billion, or 5.8 percent of the portfolio. Mastercard was about $1.1 billion, at 5.6 percent. S&P Global was about $1.1 billion, or 5.4 percent. The filing also shows Pershing Square sold out of Alphabet, a position worth about $99 million at the end of March, and trimmed Amazon shares by roughly a quarter. The fund returned to Netflix with a stake of about $934 million, four years after selling its previous position.

Each company collects a small fee on transactions it doesn't originate, fund, or take risk on. Visa processed 71.7 billion transactions in its fiscal third quarter, up 10 percent year over year, generating $11.6 billion in net revenue at an operating margin near 60 percent. Mastercard's second-quarter gross dollar volume rose 8 percent to $2.9 trillion, with net revenue also up 14 percent. S&P Global's ratings revenue rose 17 percent to $1.34 billion.

Fee collectors with no credit risk

Visa and Mastercard run the payment rails between shopper banks and merchant banks, keeping a small fee from nearly every swipe. Neither carries the loans behind those purchases — the issuing banks take the credit losses. The networks collect their fee either way. S&P Global runs a similar model on debt issuance, charging companies for credit ratings, and on index licensing fees from fund managers. The company's indices revenue rose 20 percent during the quarter, including 22 percent growth in fees tied to assets in funds tracking its indexes. All three get paid on activity they don't have to create — the volume comes from everyone else.

Durability comes at a premium

Visa trades within about 1 percent of its 52-week high at a forward price-to-earnings ratio of about 26. Mastercard trades near its high as well. S&P Global is the exception, trading about 20 percent below its own 52-week high.

The concentrated bet suggests Ackman is prioritizing durable fee-based revenue over valuation. Fee collectors like these grow with total spending, borrowing, and investing rather than with any single product cycle, and they do it with little capital at risk. Visa alone returned $6.2 billion to shareholders through buybacks and dividends last quarter. Investors will watch Pershing Square's next 13F filing for any further accumulation.

This article is for informational purposes only and does not constitute investment advice.