Is Moody’s Corp. (MCO) A Smart Long-Term Buy?

Baron Funds, an investment management firm, published its fourth quarter 2020 “Baron FinTech Fund” investor letter – a copy of which can be downloaded here. A return of 13.61% was recorded by its Retail Shares, and 13.67% by its Institutional Shares in the fourth quarter of 2020, both below its  FactSet Global FinTech Benchmark that delivered a 21.35% return but above its S&P 500 index that was up by 12.15% in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Baron FinTech Fund, in their Q4 2020 investor letter, mentioned Moody’s Corporation (NYSE: MCO) and emphasized their views on the company. Moody’s Corporation is a New York-based credit rating company that currently has a $54.4 billion market capitalization. Since the beginning of the year, MCO delivered a 0.19% return, extending its 12-month gains to 48.55%. As of March 23, 2021, the stock closed at $290.78 per share.

Here is what Baron FinTech Fund has to say about Moody’s Corporation in their Q4 2020 investor letter:

“Moody’s Corporation provides credit ratings, financial intelligence, and analytical tools to assist businesses in making decisions. Moody’s reported excellent financial results due to continued growth in rated debt issuance. However, the stock detracted on investor expectations that issuance trends will moderate into 2021.The announced retirement of long-time CEO Ray McDaniel may have also weighed on sentiment. We continue to own the stock due to our views of the company’s long runway for growth and strong competitive advantages.”

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Our calculations show that Moody’s Corporation (NYSE: MCO) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Moody’s Corporation was in 59 hedge fund portfolios, compared to 60 funds in the third quarter. MCO delivered a 3.38% return in the past 3 months.