Shrewdness is recognizing a wonderful business and possessing the patience to let it grow into a fortune.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 1
I'm a big fan of Li Lu.
Q1 he initiates a 1.6% position in SPGI. Raised my curiosity. Doesn't scream crazy cheap and a long term rear-view chart is quite boring.
Can anyone care to help with some insight? From Wiki:
<S&P Global Inc. is an American publicly traded corporation headquartered in Manhattan, New York. Its primary areas of business are financial information, analytics, and energy and commodities intelligence. It is the parent company of S&P Global Ratings, S&P Global Energy, S&P Global Market Intelligence, S&P Global Mobility, and the Indian credit rating agency CRISIL. It is also the majority owner of the S&P Dow Jones Indices joint venture. "S&P" is a shortening of "Standard and Poor's".>
Is this a bet on better future crystal balls, perhaps AI? Or, maybe an opaque plain Jane value opportunity?
Mr. Lu opened a five new positions in Q1. This one intrigues me.
m
No. of Recommendations: 0
He also bought MSCI, MCO, HRB.
He bought equals amounts around $50 million of MSCI,SPGI and HRB and smaller amount of MCO.
HRB is a tax prep company, the other three are financial services company which earn fees for providing ratings and other services from proprietary data and software. Historically these companies had strong moats, are well entrenched and earn high returns on capital, and consequently have high valuations. MCO and SPGI typically trade at PE multiples in the mid 30s.
They were all hit hard last quarter by fears that new competitors using AI tools could replace their expensive services and products.
Both MSCI and SPGI are now trading at forward PEs in the high 20s. So if you believe AI tools won’t damage them, then they may be undervalued. Obviously Li Lu is in that camp.
Interestingly Li Lu sold BAC, presumably to pay for his new positions.
No. of Recommendations: 0
“Both MSCI and SPGI are now trading at forward PEs in the high 20s. So if you believe AI tools won’t damage them, then they may be undervalued.”
Interesting wrt Li Lu’s new buys/sell. Fyi, I did briefly hear SPGI discussed in Omaha during a non-Berkshire panel discussion. They discussed the same thinking as you have outlined above with its very strong moat and the widespread dependence of the ratings agencies.
Also, it is interesting Greg mentioned Moody’s as one of the four investees where there will be “limited activity in these holdings”
