World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Moody’s Corporation (NYSE:MCO) has experienced an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that mco isn’t among the 30 most popular stocks among hedge funds.
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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s analyze the recent hedge fund action encompassing Moody’s Corporation (NYSE:MCO).
Hedge fund activity in Moody’s Corporation (NYSE:MCO)
Heading into the second quarter of 2019, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in MCO over the last 15 quarters. So, let’s examine 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 $4467.5 million worth of stock at the end of March. It was followed by Akre Capital Management with a $1029 million position. Other investors bullish on the company included Windacre Partnership, AltaRock Partners, and Cantillon Capital Management.
As industrywide interest jumped, specific money managers have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, initiated the biggest position in Moody’s Corporation (NYSE:MCO). Holocene Advisors had $17.7 million invested in the company at the end of the quarter. Andrew Sandler’s Sandler Capital Management also made a $13 million investment in the stock during the quarter. The other funds with brand new MCO positions are Jeffrey Talpins’s Element Capital Management, David Rodriguez-Fraile’s BlueMar Capital Management, and Roy Vermus and Shlomi Bracha’s Noked Capital.
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. These stocks are Eaton Corporation plc (NYSE:ETN), Worldpay, Inc. (NYSE:WP), eBay Inc (NASDAQ:EBAY), and Johnson Controls International plc (NYSE:JCI). This group of stocks’ market valuations are closest to MCO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ETN | 39 | 684979 | 9 |
| WP | 75 | 5218167 | 27 |
| EBAY | 48 | 3933951 | 6 |
| JCI | 25 | 727926 | -1 |
| Average | 46.75 | 2641256 | 10.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.75 hedge funds with bullish positions and the average amount invested in these stocks was $2641 million. That figure was $6446 million in MCO’s case. Worldpay, Inc. (NYSE:WP) 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 25 bullish hedge fund positions. Moody’s Corporation (NYSE:MCO) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on MCO as the stock returned 3.7% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
