When the market uptrend resumed on April 29, Moody's (
) broke out of a base in heavy volume.
The base, however, was an oddly shaped cup with handle. The
move to the bottom of the base involved only one week -- a 22%
dive in huge volume in the week ended Feb. 8.
Normally, bulls like to see a stock consolidate in an orderly
What was behind the dive?
Companies that provide credit ratings have been and are the
targets of lawsuits, government probes and general scapegoating
efforts. As IBD reported on Feb. 8, concerns swirled that Moody's
might become a target of the feds. The Justice Department at that
time initiated a $5 billion civil suit against Standard &
In Q1, Moody's took a charge of 14 cents a share related to
CEO Raymond McDaniel said at a recent conference call that
Moody's was the target of about four dozen U.S. lawsuits since
the financial crisis and three dozen have been settled one way or
The company's earnings have been rising since EPS declines in
In the past three quarters, earnings grew 39%, 77% and 28%.
Revenue climbed 30%, 33% and 13%. Pretax margin was 38.6% last
year, the best in four years.
Moody's Corp. pays a quarterly dividend of 20 cents a share.
The payout has doubled since late 2009, and the annualized yield
Increases in the payout appear likely. CFO Linda Huber said at
the conference call that "dividend yields could use a little bit
About half of the company's cash balance is overseas. Huber
confirmed that a high U.S. tax rate is keeping the money
Warren Buffett'sBerkshire Hathaway (BRKA) sold 1.75 million
shares recently but still holds 26.7 million shares.