Moody’s Corporation (widely known as Moody’s) is a business and financial services company that provides credit ratings as well as research and other risk analysis metrics and solutions.
The company was founded in 1909 by John Moody and is headquartered in New York City, United States.
The company offers its services via two business segments: Moody’s Investment Service (MIS), which includes its famed credit rating services; and Moody’s Analytics (MA), which includes non-credit rating financial analysis and risk management products and services.
John started Moody’s to help investors assess the performance and assets of companies operating in the then lucrative rail industry.
His detailed reporting included an ingenious rating system that eventually led to the incorporation of MIS.
The company quickly expanded its coverage to US stocks and bonds. In his twilight years, John opted to sell the business to the then credit information giant Dun & Bradstreet Corporation (D&B).
Despite the acquisition, Moody’s continued to operate as an independent company and it witnessed impressive growth particularly during the late 1990s, posting better numbers than its parent company.
In light of this, D&B decided to spin off Moody’s into a publicly-traded company on September 30th, 2000. Ironically, Moody’s would from then on be ‘rated’ by others based on its performance and assets!
As of the end of 2020, Moody’s is a global powerhouse in its field, and it operates a high-quality business model with a massive economic moat that practically guarantees profitability even during tough economic times.
The company is always keen on maintaining its status and has made strategic acquisitions of companies, such as Four Twenty Seven, RBA International, Reis Inc., and Bureau van Dijk.
Moody’s is listed on the NYSE where it trades under the ticker symbol MCO. The stock falls in the Financial Services sector, under the Financial Data & Stock Exchanges industry.
MCO Stock History
Moody’s has implemented just one stock split in its history to date – a 2-for-1 split on May 19th, 2005. The price chart of MCO shows a stock that has rewarded investors consistently since the turn of the millennium.
Towards the end of 2000, MCO traded just above $10, and slowly drifted higher to above $20 by 2002. The stock then picked up steam and sustained an uptrend that topped out at circa $75 by February 2007.
The controversies that hit the industry during the 2007/8 financial crisis triggered a selloff that bottomed out below $20 by February 2009. After a brief period of consolidation, the MCO stock broke out and went on a rally that saw it print an all-time high of circa $305 in September 2020.
Moody’s has been a consistent dividend payer, and investors are confident that the payouts are sustainable going forward.
How to Trade Moody’s Stock
Moody’s is a giant in its space and its stock is considered a must-watch on Wall Street. Here are some of the factors to consider when trading MCO stock:
- Legislative and Taxation Issues
Moody’s operates in a highly regulated space, especially since the accusations of their controversial role in the 2007/8 financial crisis. Alongside other top credit rating agencies, Moody’s was accused of misleading investors about the safety and quality of mortgage-backed debts. This led to increased regulatory supervision in this space, with the SEC (US Securities and Exchange Commission) establishing the OCR (Office of Credit Ratings) to exclusively supervise statistical rating organisations. Close oversight poses significant legislative and taxation risks for a company with footprints all around the world.
- Competition and New Product Rollout
Moody’s is dominant in its industry but it faces stiff competition from S&P Global and Fitch Rankings, who together form the ‘Big Three’ of Credit Ratings. Although this is a stable industry with room for growth and a high barrier of entry, competition within the major agencies is fierce. Success for Moody’s going forward will thus be guaranteed by diversification into other related research away from credit ratings. The company has made some impressive acquisitions that allow it to provide quality insights to its clients away from credit ratings. This is in addition to entering new markets and new products which bodes well for a diversified future for Moody’s.
- Lawsuits and Negative PR
The credit rating scene easily attracts lawsuits and negative PR. Moody’s, in particular, has been the subject of lawsuits because of unfair ratings of public bonds and structured finance products, which eventually were settled by huge fines. These are risks that can impact overall margins significantly.
- Periodic Earnings Reports
Moody’s fiscal year runs from January to December, and the MCO stock is very sensitive to the periodic earnings reports released by the company quarterly, semi-annually, and annually.
Investors usually look into metrics, such as net income, earnings growth, and forward guidance. Positive numbers usually inspire higher stock prices, whereas weak figures trigger investor concern and potentially lower prices.
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