Moody’s Corp. (MCO) Musings

We have a very small position in Moody’s Corp. (MCO), 0.8% of our US portfolio. In my continuing efforts to trim our portfolio and return to our concentrated way all small positions are under the microscope. A less than one percent position is a waste of my time. So it’s either put up or shut up, or in this case, buy more or sell.

Would I buy more Moody’s today? No. MCO is not one of my best companies and is not a great value proposition. The long term story of Moody’s is still interesting and when credit markets flourish the pent up demand for credit could see Moody’s consistently beating estimates.

  • Current Price $25.46
  • Earnings out 29-Apr-09 BMO, average est $0.34 with range of $0.28-0.39.
  • Share price in strong uptrend since March 6 low of $15.57, but hey what’s not?
  • Margins and returns are high, Moody’s are certainly a fantastic looking business.
  • Great cash flow.
  • Balance sheet highlights the leverage they now employ.
  • S&P have a Hold and 12 month price target of $23.
  • Annual dividend of $0.40 is a low yield of 1.6% 

Moody’s is on my sell list. May $25 Calls, MCOEE, $2.40-2.45. Do you see it differently?

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  • MCO closed up 3.01 (12.36%) today. Fortunately my calls didn’t execute the other night. Though even if they had I wouldn’t mind. Now I need to decide between selling the shares or calls or letting this winner run. Today’s rise confirms that MCO is outside my circle of competence. I have no idea why MCO would jump 12% on on SEC scrutiny of rating agencies.
    The Calls are now $3.50 – 3.60.

  • Sold Moody’s today April 27 with limit order. Despite the continued strong up trend in MCO I decided to sell rather than implement a trailing stop or sell calls.
    Earnings are out 29 April BMO. Consensus estimates are for $0.34 eps on $393.32M, respective ranges of $0.28-0.39 and $371M – 406.2M. I have no eye dear.

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