MasterCard (MA): Charge along with Buffett

With more than 988 million of its products in use, $3.5 billion in cash, and a $2 billion buyback, I consider MasterCard (MA) a 'buy it and hold it forever' stock.

And I'm not the only one who feels this way. Just a few months ago, Warren Buffett's Berkshire Hathaway bought 189,000 shares, adding to its 216,000 share stake.

MasterCard racks up $545 billion in transactions each year. But besides its size, what is it about MasterCard that has grabbed Mr. Buffett's attention?

Well for one, even though MasterCard makes credit cards, it doesn't actually take on any credit risk. It simply acts as a "toll" operator.

You see, MasterCard doesn't have anything to do with the debt that investors put on their credit cards -- that's the banks' liability. MasterCard simply earns a small percentage of each transaction.
In other words, MasterCard makes more money as the number of people around the world using its cards grows.

And though that number is growing daily, according to MasterCard CEO, Ajay Banga, close to 90% of all transactions in the world still use cash.

So what Mr. Buffett most likely sees is simple : There's a massive untapped market for credit and debit cards around the world.

And who better to cash in on this opportunity than the world's second-largest credit card company?

So where is this explosive growth coming from? The emerging markets, but more specifically -- China. At the current pace, China will overtake the US as the world's largest credit card market by the end of the decade.

As China moves away from cash and into plastic, MasterCard will be there, growing earnings along the way. In fact, analysts expect MasterCard to grow earnings by 19.6% in the next year alone.

But what really has investors excite! d are so me of MasterCard's recent shareholder-friendly moves.

For example, the company recently announced bumping up its existing buyback program by another $1 billion, so that it is now buying back $2 billion in stock -- roughly 5% of the shares outstanding.

The company also has less than $30 million in debt; its $3.5 billion in cash comes out to more than $28 in cash per share.

With cash in the bank, a growing business, and a shareholder-friendly focus, it's easy to see what investors like Buffett are drawn to this stock.