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Does Moody’s Corporation (MCO) Operate in a “‘Noah’s Ark’ Industry Structure”?

L1 Capital, an investment management firm, released its “L1 Capital International Fund” third quarter 2023 investor letter, a copy of the same can be downloaded here. In the September 2023 quarter, the fund outperformed the Index by 4.0% returning 3.6% (in Australian dollars). Year-to-date, the fund returned 28.3% (in Australian dollars), outperforming the Index by 11.6%. Please check the top five holdings of the fund to know its best picks in 2023.

L1 Capital International Fund highlighted stocks like Moody’s Corporation (NYSE:MCO) in the third quarter 2023 investor letter. Headquartered in New York, New York, Moody’s Corporation (NYSE:MCO) is an integrated risk assessment firm. On November 29, 2023, Moody’s Corporation (NYSE:MCO) stock closed at $361.89 per share. One-month return of Moody’s Corporation (NYSE:MCO) was 10.73%, and its shares gained 18.23% of their value over the last 52 weeks. Moody’s Corporation (NYSE:MCO) has a market capitalization of $66.228 billion.

L1 Capital International Fund made the following comment about Moody’s Corporation (NYSE:MCO) in its Q3 2023 investor letter:

"Portfolio adjustments during the September 2023 quarter were modest, diversified, but meaningful. In total around 10% of the Fund was divested and reinvested into opportunities we consider provide a superior risk-adjusted base case return.

We continued to trim our investment in high-quality technology businesses such as Intuit, mentioned previously. These adjustments were purely for valuation considerations, rather than any business concerns and some of these companies remain significant portfolio holdings.

The Fund’s remaining investment in Moody’s Corporation (NYSE:MCO)’s was fully divested during the September quarter. Moody’s is the world’s leading credit rating, risk assessment and analytics business. The core credit ratings business is largely a duopoly with S&P Global, with modest competition from Fitch Ratings and regional competitors – a great example of our preferred ‘Noah’s Ark’ industry structure.

The share price of Moody’s has been volatile over recent times, often reacting too greatly to changes in short-term capital markets conditions. During the quarter we took advantage of positive market sentiment to divest our holding at a share price we considered to be above fair value. Moody’s is very well managed and ‘ticks all our boxes’ for one of the world’s highest-quality businesses. The company has moved from our Portfolio to our Bench of potential investments. Having a Bench of ‘ready to go’ investment opportunities is a core aspect of our investment process. We continue to analyse Moody’s as if we owned it and are excited by the pull-back in the share price from recent highs."

A hand holding a rating chart, emphasizing the importance of credit ratings in the financial services sector.

Moody’s Corporation (NYSE:MCO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 58 hedge fund portfolios held Moody’s Corporation (NYSE:MCO) at the end of third quarter which was 60 in the previous quarter.

We discussed Moody’s Corporation (NYSE:MCO) in another article and shared the list of best stocks to buy for good returns. In addition, please check out our hedge fund investor letters Q3 2023 page for more investor letters from hedge funds and other leading investors.


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