The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Moody’s Corporation (NYSE:MCO) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Moody’s Corporation (NYSE:MCO) investors should pay attention to an increase in enthusiasm from smart money of late. MCO was in 35 hedge funds’ portfolios at the end of September. There were 30 hedge funds in our database with MCO positions at the end of the previous quarter. Our calculations also showed that mco isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a gander at the key hedge fund action surrounding Moody’s Corporation (NYSE:MCO).
How have hedgies been trading Moody’s Corporation (NYSE:MCO)?
At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. On the other hand, there were a total of 38 hedge funds with a bullish position in MCO at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the biggest position in Moody’s Corporation (NYSE:MCO). Berkshire Hathaway has a $4.1248 billion position in the stock, comprising 1.9% of its 13F portfolio. Sitting at the No. 2 spot is Charles Akre of Akre Capital Management, with a $950 million position; 11.1% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions include Mark Massey’s AltaRock Partners, and Israel Englander’s Millennium Management.
Now, key money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the most valuable call position in Moody’s Corporation (NYSE:MCO). Point72 Asset Management had $156.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $28.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management, and Robert Joseph Caruso’s Select Equity Group.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Moody’s Corporation (NYSE:MCO) but similarly valued. These stocks are Thomson Reuters Corporation (NYSE:TRI), State Street Corporation (NYSE:STT), Workday Inc (NYSE:WDAY), and Worldpay, Inc. (NYSE:WP). This group of stocks’ market valuations match MCO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRI | 24 | 391841 | 10 |
| STT | 35 | 1268343 | -1 |
| WDAY | 30 | 1148004 | -1 |
| WP | 60 | 3562567 | 14 |
| Average | 37.25 | 1592689 | 5.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.59 billion. That figure was $5.87 billion in MCO’s case. Worldpay, Inc. (NYSE:WP) is the most popular stock in this table. On the other hand Thomson Reuters Corporation (NYSE:TRI) is the least popular one with only 24 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard WP might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
