Hedge Funds Are Selling Moody’s Corporation (MCO)

In this article we will check out the progression of hedge fund sentiment towards Moody’s Corporation (NYSE:MCO) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Moody’s Corporation (NYSE:MCO) has seen a decrease in hedge fund sentiment in recent months. Moody’s Corporation (NYSE:MCO) was in 55 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 61. Our calculations also showed that MCO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are numerous gauges stock market investors can use to value publicly traded companies. A pair of the less known gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can outpace the broader indices by a very impressive amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Chris Hohn of TCI Fund Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to go over the recent hedge fund action encompassing Moody’s Corporation (NYSE:MCO).

Do Hedge Funds Think MCO Is A Good Stock To Buy Now?

At first quarter’s end, a total of 55 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MCO over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Moody’s Corporation (NYSE:MCO) was held by Berkshire Hathaway, which reported holding $7366.6 million worth of stock at the end of December. It was followed by TCI Fund Management with a $1959.7 million position. Other investors bullish on the company included Akre Capital Management, Viking Global, and Valley Forge Capital. In terms of the portfolio weights assigned to each position Rings Capital Management allocated the biggest weight to Moody’s Corporation (NYSE:MCO), around 37.29% of its 13F portfolio. Valley Forge Capital is also relatively very bullish on the stock, earmarking 16.32 percent of its 13F equity portfolio to MCO.

Because Moody’s Corporation (NYSE:MCO) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of money managers that elected to cut their positions entirely by the end of the first quarter. Interestingly, Guardian Capital’s GuardCap Asset Management cut the largest position of the “upper crust” of funds watched by Insider Monkey, worth close to $111.4 million in stock, and James Parsons’s Junto Capital Management was right behind this move, as the fund cut about $39.2 million worth. These transactions are interesting, as total hedge fund interest dropped by 4 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Moody’s Corporation (NYSE:MCO) but similarly valued. We will take a look at Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), NXP Semiconductors NV (NASDAQ:NXPI), Prudential Public Limited Company (NYSE:PUK), Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), Stellantis N.V. (NYSE:STLA), ICICI Bank Limited (NYSE:IBN), and UBS Group AG (NYSE:UBS). This group of stocks’ market values resemble MCO’s market value.

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As you can see these stocks had an average of 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $1330 million. That figure was $13727 million in MCO’s case. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 2 bullish hedge fund positions. Moody’s Corporation (NYSE:MCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MCO is 68.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on MCO as the stock returned 15.7% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.