Credit ratings agency Moody's Corporation (MCO) is the quintessential financial data stock. As one of the "big three" ratings firms, Moody's controls around 40% of the market for debt ratings, a position that gives the firm ample cross selling opportunities among its user base.
Still, that size hasn't spared Moody's from getting hit by short sellers: a short interest ratio of 9.2 means that it would take nearly two weeks of buying pressure for sellers to exit their positions in MCO.The biggest black cloud for Moody's remains the firm's contribution to the financial meltdown of 2008, an event that the firm's ratings were ostensibly supposed to avoid. The inflated ratings that Moody's (and its peers) put out seriously damaged the firm's reputation, and will take time to repair. Even so, MCO is still one of the biggest games in town for debt ratings, and cheap credit costs have re-opened the debt issuance spigot worldwide. With rates expected to remain low for an extended period, that should remain the case for the foreseeable future. Credit ratings aren't Moody's only source of revenues. The firm also sells research and quantitative databases, products that (like ratings) are capital-light and produce impressive margins. With strong financial health and a thriving business, expect this stock to shake out the shorts sooner rather than later. As of the most recently reported period, Moody's was one of Warren Buffett's holdings, comprising 1.5% of Berkshire Hathaway's total portfolio.
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