Finance Jack
Equity Research
MSCI trades at one of its lowest valuations ever, even though its fundamentals keep compounding while the stock has been flat for years. Its index business, which takes a percentage of AUM from ETFs that track its lists, is capital light, high margin and recurring, with high switching costs; so much of Wall Street runs on MSCI indices that they are nearly impossible to rip out. x.comÂ
MSCI's stock is pressing its roughly $650 2021 high after years of higher lows, a long base that sets up a durable uptrend. Each pullback since 2022 has stopped higher, signaling sellers are running out. A decisive breakout on strong volume would confirm the business story. MSCI collects a fee as passive funds grew from 1% of US equity fund assets in 1993 to over 50% in 2024, index retention has stayed above 93% for 16 quarters, and it has grown from a $1 billion index firm into four businesses. … Show more
MSCI is a very high-quality, founder-led business, but its 10% post-earnings drop warrants only a small buy as its extreme 2019-Covid multiple keeps normalizing. The business has done well, and Henry Fernandez bought about $2.25M of shares at roughly today's price. MSCI may not stay the dominant benchmark for decades, since fund managers can design their own; its main edge was being first to gain traction with international benchmarks. x.com x.comÂ
Financial tollbooth businesses are a great place to invest because they are embedded in the system, take a cut whenever money moves or decisions are made, and need little capital. S&P Global and Moody's, tied to credit markets, are hard to replace; FICO is strong but more exposed to pricing backlash; CME gains when volatility lifts volumes; LSEG fits too. MSCI is the favorite, with fees spread across trillions tied to benchmarks for durable pricing power, and insider buying near current prices. … Show more
The S&P 500's elevated P/E masks concentration in just a few stocks, making index exposure less appealing than selective stock picking for risk and reward. Its P/E is well above the ten-year median; digging into individual constituents looks more sensible than buying all 500. x.comÂ
Fair Isaac, S&P Global, Moody's and MSCI are among the best businesses on the planet, amazing to hold for the long term and to beat the market. x.comÂ
MSCI is a long-term AI winner because AI is a huge tailwind for companies like it. The market is focused on direct AI winners now, but over the long term many more beneficiaries like MSCI will emerge. x.comÂ
Virtu Financial is a little-known but key ETF market maker in an ultra-high-growth niche, yet trades at a P/E of only 10. x.comÂ
S&P Global's valuation compression while fundamentals still look good is a gift from the market, because it owns two of the strongest businesses in the world. x.comÂ
S&P Global, Mastercard, Visa, Moody's and Berkshire Hathaway have turned from portfolio ballast into funding shorts. These EPS compounders once pulled portfolios up alongside spicier longs, but they are never particularly cheap, Visa may rise only 4-5% on great earnings, and they can't be taken out. For most investors' horizons they are irrelevant next to momentum stocks that gap up 30% on narratives, so owning them now means being long funding shorts. That could change. x.com x.comÂ
Quality dividend stocks look like a great place to be over the next few years as the crowded tech trade unwinds. Per @PeterBerezinBCA, in the early dotcom bust tech crashed while the rest of the market rose, so the hedge for stocks was other stocks. A quality dividend basket holds old-economy, cash-generative businesses at sane multiples, while the index hides 50% of its weight in names at 10 times sales. That outweighs a general dislike of dividends as inefficient, taxable compounding. x.com … Show more
