Should You Buy Moody’s Corporation (MCO)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Moody’s Corporation (NYSE:MCO).

Is Moody’s Corporation (NYSE:MCO) a buy, sell, or hold? The smart money is buying. The number of bullish hedge fund bets went up by 3 recently. Moody’s Corporation (NYSE:MCO) was in 31 hedge funds’ portfolios at the end of the third quarter of 2015. There were 28 hedge funds in our database with Moody’s Corporation (NYSE:MCO) positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as SunTrust Banks, Inc. (NYSE:STI), Magna International Inc. (USA) (NYSE:MGA), and Royal Caribbean Cruises Ltd. (NYSE:RCL) to gather more data points.

In the eyes of most traders, hedge funds are perceived as unimportant, old investment vehicles of years past. While there are greater than 8000 funds trading today, Our experts hone in on the elite of this club, approximately 700 funds. Most estimates calculate that this group of people has their hands on bulk of the hedge fund industry’s total capital, and by tailing their best picks, Insider Monkey has come up with many investment strategies that have historically beaten the broader indices. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, let’s take a glance at the recent action surrounding Moody’s Corporation (NYSE:MCO).

How are hedge funds trading Moody’s Corporation (NYSE:MCO)?

Heading into Q4, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 11% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Berkshire Hathaway holds the biggest position in Moody’s Corporation (NYSE:MCO). Berkshire Hathaway has a $2.42 billion position in the stock, comprising 1.9% of its 13F portfolio. The second largest stake is held by Akre Capital Management, managed by Charles Akre, which holds a $354.1 million position; the fund has 8.2% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism encompass D E Shaw, Jonathan Bloomberg’s BloombergSen, and Richard Chilton’s Chilton Investment Company.

As aggregate interest increased, some big names have been driving this bullishness. Stevens Capital Management, managed by Matthew Tewksbury, established the most valuable position in Moody’s Corporation (NYSE:MCO). Stevens Capital Management had $3.7 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $2.4 million investment in the stock during the quarter. The following funds were also among the new Moody’s Corporation (NYSE:MCO) investors: George Hall’s Clinton Group, John Overdeck and David Siegel’s Two Sigma Advisors, and Greg Poole’s Echo Street Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Moody’s Corporation (NYSE:MCO) but similarly valued. We will take a look at SunTrust Banks, Inc. (NYSE:STI), Magna International Inc. (USA) (NYSE:MGA), Royal Caribbean Cruises Ltd. (NYSE:RCL), and Consolidated Edison, Inc. (NYSE:ED). This group of stocks’ market valuations is closest to Moody’s Corporation (NYSE:MCO)’s market valuation.

As you can see, these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $839 million. That figure was $3.45 billion in Moody’s Corporation (NYSE:MCO)’s case. SunTrust Banks, Inc. (NYSE:STI) is the most popular stock in this table. On the other hand, Consolidated Edison, Inc. (NYSE:ED) is the least popular one with only 14 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, SunTrust Banks, Inc. (NYSE:STI) might be a better candidate to consider a long position.