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Hedge Funds Never Been This Bullish On Moody’s Corporation (MCO)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Moody’s Corporation (NYSE:MCO) based on that data and determine whether they were really smart about the stock.

Moody’s Corporation (NYSE:MCO) was in 61 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 55. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. MCO has experienced an increase in hedge fund interest recently. There were 50 hedge funds in our database with MCO positions at the end of the first quarter. Our calculations also showed that MCO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Andreas Halvorsen

Andreas Halvorsen of Viking Global

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to check out the fresh hedge fund action encompassing Moody’s Corporation (NYSE:MCO).

How have hedgies been trading Moody’s Corporation (NYSE:MCO)?

At Q2’s end, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MCO over the last 20 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Among these funds, Berkshire Hathaway held the most valuable stake in Moody’s Corporation (NYSE:MCO), which was worth $6777.5 million at the end of the third quarter. On the second spot was Akre Capital Management which amassed $1548.5 million worth of shares. Viking Global, AltaRock Partners, and Windacre Partnership were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Rings Capital Management allocated the biggest weight to Moody’s Corporation (NYSE:MCO), around 37.76% of its 13F portfolio. Valley Forge Capital is also relatively very bullish on the stock, designating 19.02 percent of its 13F equity portfolio to MCO.

As one would reasonably expect, specific money managers were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, established the most valuable position in Moody’s Corporation (NYSE:MCO). Viking Global had $268.5 million invested in the company at the end of the quarter. Doug Silverman and Alexander Klabin’s Senator Investment Group also made a $68.7 million investment in the stock during the quarter. The other funds with new positions in the stock are James Parsons’s Junto Capital Management, Peter Simmie’s Bristol Gate Capital Partners, and Peter Seuss’s Prana Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Moody’s Corporation (NYSE:MCO). These stocks are Humana Inc (NYSE:HUM), Northrop Grumman Corporation (NYSE:NOC), Global Payments Inc (NYSE:GPN), Sea Limited (NYSE:SE), Truist Financial Corporation (NYSE:TFC), CNOOC Limited (NYSE:CEO), and Boston Scientific Corporation (NYSE:BSX). This group of stocks’ market caps match MCO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HUM 73 4697967 3
NOC 47 990004 2
GPN 66 3311740 -1
SE 82 6358325 6
TFC 33 287639 -1
CEO 13 166646 2
BSX 66 2312667 7
Average 54.3 2589284 2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 54.3 hedge funds with bullish positions and the average amount invested in these stocks was $2589 million. That figure was $10771 million in MCO’s case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) is the least popular one with only 13 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 74.8. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately MCO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MCO were disappointed as the stock returned 3.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.