S&P Global Inc (SPGI)

They've been living under the cloud that software will make their business obsolete, but 90% of SPGI's business is proprietary. They're big on oil market data. SPGI has traded down to 22x PE vs. 27x normally. This current run will continue.

He has concerns about AI competition, that it could be disruptive to financial research companies.

Has been pressured by AI fears. SPGI says their database is proprietary and protected from AI. Meanwhile, they have a profitable ratings business, enjoying an oligopoly. More M&A activity will help. Sells at a low PE and the selling has been overdone.

Yes, boogeyman-under-the-bed syndrome. Very cheap. Massive purveyor of historical data. No reason to think it won't be able to adopt new technology. Diverse and deep distribution system. Reputation for quality. AI is a tailwind, not a headwind.

Note:  His colleague, Christine Poole, owns this in her fund.

Is -22.5% this year on AI fears. He can understand AI-related pullbacks in other sectors because Anthropic is directly targeting them, but it's insane that the exchanges are being targeted. Do people think that Anthropic can create all-new benchmarks. 

She bought more S&P Global which is down 25% from this software selling. They cannot be totally disruptive. They are the rating giant in fixed income where we're seeing lots of debt selling. Business is good and will improve.

 It reports on Tuesday. The market thinks that AI will take over these software stocks.

SPGI and MSCI provide data to stock markets, which is a good business: recurring revenue, high-return on capital, consistent and they supply a volume of data. Doesn't like TRI.

All its businesses are very profitable, with operating margins in 50% range. Recurring revenue stream from subscriptions. Great businesses, very scalable. 

Very high margins, very profitable, recurring revenue. Oligopoly with Moody's. Divisions experiencing good growth. Highly scalable. Well positioned to benefit from increased capital markets activity. Long-term compounder. Yield is 0.7%.

Main business is doing ratings, which is facing a slowdown right now, but starting to see a pickup in capital markets activity. When bonds mature or get renewed, they have to be rated. Also does benchmark indices. Need-to-have information for financial services industry. Very high margins, very scalable, diversified. 70% of revenue is recurring. Acquisition synergies are finally being realized. Yield is 0.83%.

Yesterday, it reported a strong top and bottom line beat and raised their full-year forecast. This quarter deserves more attention as shares are down 5%.

Take note of its high at the very end of 2021 at $480, and the stock is just below that now. If you want to enter, do it now with a tranche, then add another tranche past $480.