Is Moody’s Corporation (NYSE:MCO) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Moody’s Corporation (NYSE:MCO) has seen an increase in activity from the world’s largest hedge funds in recent months. Overall hedge fund sentiment towards the stock is at its all time high. Our calculations also showed that MCO isn’t among the 30 most popular stocks among hedge funds (see the video at the end of this article).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the latest hedge fund action surrounding Moody’s Corporation (NYSE:MCO).
What have hedge funds been doing with Moody’s Corporation (NYSE:MCO)?
At the end of the second quarter, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. On the other hand, there were a total of 30 hedge funds with a bullish position in MCO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Berkshire Hathaway was the largest shareholder of Moody’s Corporation (NYSE:MCO), with a stake worth $4818.3 million reported as of the end of March. Trailing Berkshire Hathaway was Akre Capital Management, which amassed a stake valued at $1109.8 million. Windacre Partnership, AltaRock Partners, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the most outsized position in Moody’s Corporation (NYSE:MCO). Millennium Management had $124.7 million invested in the company at the end of the quarter. Richard Chilton’s Chilton Investment Company also initiated a $63 million position during the quarter. The following funds were also among the new MCO investors: Neal Nathani and Darren Dinneen’s Totem Point Management, Michael Hintze’s CQS Cayman LP, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s check out hedge fund activity in other stocks similar to Moody’s Corporation (NYSE:MCO). These stocks are Sempra Energy (NYSE:SRE), Dell Technologies Inc. (NYSE:DELL), Johnson Controls International plc (NYSE:JCI), and BB&T Corporation (NYSE:BBT). This group of stocks’ market caps resemble MCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SRE | 25 | 1323401 | -6 |
| DELL | 40 | 1937951 | 3 |
| JCI | 18 | 634680 | -7 |
| BBT | 23 | 352478 | -7 |
| Average | 26.5 | 1062128 | -4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $1062 million. That figure was $7179 million in MCO’s case. Dell Technologies Inc. (NYSE:DELL) is the most popular stock in this table. On the other hand Johnson Controls International plc (NYSE:JCI) is the least popular one with only 18 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 calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on MCO, though not to the same extent, as the stock returned 5.1% during the third quarter and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
