Is Moody’s Corporation (NYSE:MCO) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They fail miserably sometimes but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
Moody’s Corporation (NYSE:MCO) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 34 hedge funds’ portfolios at the end of September. 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 ConAgra Foods, Inc. (NYSE:CAG), Barrick Gold Corporation (USA) (NYSE:ABX), and PACCAR Inc (NASDAQ:PCAR) to gather more data points.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
Keeping this in mind, let’s review the new action regarding Moody’s Corporation (NYSE:MCO).
What have hedge funds been doing with Moody’s Corporation (NYSE:MCO)?
At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MCO over the last 5 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Warren Buffett’s Berkshire Hathaway has the most valuable position in Moody’s Corporation (NYSE:MCO), worth close to $2.6712 billion, accounting for 2.1% of its total 13F portfolio. Coming in second is Akre Capital Management, led by Charles Akre, holding a $437.4 million position; 8.4% of its 13F portfolio is allocated to the company. Other peers that hold long positions comprise John Armitage’s Egerton Capital Limited, Paul Marshall and Ian Wace’s Marshall Wace LLP and Brian Bares’s Bares Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cut their entire stakes in the stock during the third quarter. Interestingly, Andrew Sandler’s Sandler Capital Management cut the biggest position of all the hedgies followed by Insider Monkey, valued at close to $12.4 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund dropped about $9.4 million worth of Moody’s Corporation (NYSE:MCO) shares.
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. We will take a look at ConAgra Foods, Inc. (NYSE:CAG), Barrick Gold Corporation (USA) (NYSE:ABX), PACCAR Inc (NASDAQ:PCAR), and Franklin Resources, Inc. (NYSE:BEN). This group of stocks’ market values resemble MCO’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $1.7 billion. That figure was a whooping $4.01 billion in MCO’s case. ConAgra Foods, Inc. (NYSE:CAG) is the most popular stock in this table. On the other hand PACCAR Inc (NASDAQ:PCAR) is the least popular one with only 26 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 CAG might be a better candidate to consider taking a long position in.