In this article you are going to find out whether hedge funds think Moody’s Corporation (NYSE:MCO) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is MCO stock a buy or sell? Moody’s Corporation (NYSE:MCO) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. Moody’s Corporation (NYSE:MCO) was in 59 hedge funds’ portfolios at the end of the fourth quarter of 2020. 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 Q4 rankings).
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Charles Akre of Akre Capital Management
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Do Hedge Funds Think MCO Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from one quarter earlier. By comparison, 49 hedge funds held shares or bullish call options in MCO a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Warren Buffett’s Berkshire Hathaway has the biggest position in Moody’s Corporation (NYSE:MCO), worth close to $7.1602 billion, accounting for 2.7% of its total 13F portfolio. The second largest stake is held by Charles Akre of Akre Capital Management, with a $1.6348 billion position; 11% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism include Andreas Halvorsen’s Viking Global, Snehal Amin’s Windacre Partnership and Dev Kantesaria’s 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 38.88% of its 13F portfolio. Valley Forge Capital is also relatively very bullish on the stock, designating 16 percent of its 13F equity portfolio to MCO.
Seeing as Moody’s Corporation (NYSE:MCO) has experienced a decline in interest from hedge fund managers, logic holds that there was a specific group of fund managers that decided to sell off their entire stakes by the end of the fourth quarter. At the top of the heap, Doug Silverman and Alexander Klabin’s Senator Investment Group said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, comprising an estimated $72.5 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also sold off its stock, about $15.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds by the end of the fourth quarter.
Let’s go over hedge fund activity in other stocks similar to Moody’s Corporation (NYSE:MCO). We will take a look at Twilio Inc. (NYSE:TWLO), Humana Inc (NYSE:HUM), Illumina, Inc. (NASDAQ:ILMN), Westpac Banking Corporation (NYSE:WBK), Banco Santander, S.A. (NYSE:SAN), DuPont de Nemours Inc (NYSE:DD), and Regeneron Pharmaceuticals Inc (NASDAQ:REGN). 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 |
|---|---|---|---|
| TWLO | 94 | 5011455 | 23 |
| HUM | 59 | 3966420 | -2 |
| ILMN | 45 | 1747647 | 1 |
| WBK | 3 | 29715 | -1 |
| SAN | 14 | 415472 | 0 |
| DD | 60 | 6277336 | -1 |
| REGN | 46 | 1330342 | 2 |
| Average | 45.9 | 2682627 | 3.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.9 hedge funds with bullish positions and the average amount invested in these stocks was $2683 million. That figure was $11352 million in MCO’s case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 3 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 63.8. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately MCO wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on MCO were disappointed as the stock returned -0.6% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
