We recently published a list of Jim Cramer’s Latest Portfolio: 10 Stocks to Buy and Sell. Since Msci Inc (NYSE:MSCI) 5th on the list, it deserves a deeper look.
Jim Cramer in a latest program discussed last week’s market selloff again, saying the notion the broader meltdown was because of “hard landing” fears is “totally false.” Cramer said that it was all related to the Japanese stock market and Yen, and “nothing more.”
“A bunch of money managers took advantage of how you can borrow against Japanese bonds which had a very low interest rate and then have relatively free money which you can put to work in stocks all around the globe, including here (the US),” Cramer said.
Jim Cramer said that small-cap stocks are “trying to come” back. However, he pointed to an “issue” with the small-cap rally. He said that no one actually bought individual small-cap stocks and instead loaded up on ETFs. Investors, according to Cramer, “walked away” when the broader market wavered.
For this article we watched the latest programs on Cramer recently aired on CNBC and picked 10 stocks he’s talking about. With each company we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Msci Inc (NYSE:MSCI)
Number of Hedge Fund Investors: 53
Jim Cramer was asked about MSCI in a latest program. He said he’d want to “own the stock” of MSCI.
“I like the fact that the company is the only single source of how we should value different industries around the world,” Cramer said.
Msci Inc (NYSE:MSCI) provides equity, fixed income, real estate indices, multi-asset portfolio analysis tools, ESG and climate products.
Msci Inc (NYSE:MSCI) is one of the biggest beneficiaries of the broader shift to index funds and the rise of passive investing over the past several years. The company has seen its revenue grow 2.5 times and EPS surge 6.8 times since 2014. Its index segment, which contributes 56% of total revenue and 80% of operating profits, is what makes this stock special. With over $15 trillion in benchmarked assets, Msci Inc (NYSE:MSCI) growth is closely tied to asset-based fees, particularly from ETFs. As markets perform well and institutional investors seek established benchmarks, MSCI’s stable, high-retention client base and pricing power offer resilience.
Msci Inc (NYSE:MSCI) predictable earnings and high retention rate—95%—are bolstered by a subscription-based model generating nearly 75% of sales.
MSCI is also a dividend payer, with a dividend growth rate of over 780% over the past decade.
Analysts expect mid-double-digit EPS growth through 2026, with projections of $14.66 for 2024, $16.69 for 2025, and $18.89 for 2026. Given Msci Inc (NYSE:MSCI) stable revenue streams and profit margins, the company is well-positioned to deliver strong returns.
Polen Focus Growth Strategy stated the following regarding MSCI Inc. (NYSE:MSCI) in its Q2 2024 investor letter:
“We re-initiated a position in MSCI Inc. (NYSE:MSCI) after owning it from 2019 to 2022. When we sold the position in April 2022, we noted that the company was an excellent compounder and would likely continue to compound earnings at a high-teens rate over the next five years. We also noted that we’d be happy to own MSCI again at a good price.
More than two years later, we’re buying back a position at a lower price despite 30% higher earnings. The stock sold off recently after MSCI reported a decrease in net new subscription sales during the first quarter. New subscription sales were up modestly compared to the prior year, but there was a bolus of cancellations due to “business events,” most notably UBS acquiring Credit Suisse and adjusting their subscriptions. While net new subscription sales might be soft near-term, retention rates remain high for this highly recurring and profitable business. This short-term softness does not change our view on the business’s competitive advantages or long-term growth profile.
MSCI has compelling competitive advantages, leadership, and secular growth trends, including the continued move of assets toward passive, international, factor-based, and ESG-related investments. We also like the company’s longer-term strategy of being the index provider for private market investments.”
Overall, Msci Inc (NYSE:MSCI) ranks 5th on Insider Monkey’s list titled Jim Cramer’s Latest Portfolio: 10 Stocks to Buy and Sell. While we acknowledge the potential of Msci Inc (NYSE:MSCI), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSCI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
