Three Short Stories: Moody's Corp., Fair Isaac and Visa

Includes: FIC, MCO, V
by: Data Explorers

The Times newspaper in London quoted the credit ratings agency Experian [EXPN/LON] as being the company at the center of a row in the House of Lords over the past one to two weeks, bringing us to think about the short interest in ratings agencies during the current economic climate.

We can reveal that Experian has an extremely small percentage of its shares outstanding on loan (%SOOL) - just 0.4%, down from 2% in September 2008, which is still a very low percentage. Utilisation is at 2%. Like all financial services firms Experian has been hit by the credit crunch, warning this month that revenue growth will be slow. However, the company’s share price has risen from 300bp to 400bp between October and January, but is down from 430bp in December.

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In America, Moody’s (NYSE:MCO) has seen a much larger amount of short interest over the last six months, with nearly 18% of its SOOL in July 2008. Since last summer, there has been a wide amount of short covering, and it is down from that figure to 8% in October, but it has now climbed back up again to 11%. The company’s share price has fell sharply from $40 to $15 between July and November, and as you can see from this graph, short investors closed out their positions in the stock as the price decreased.

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Another interesting American is Fair Isaac (FIC), who provides analytical software and data management products and services. FIC has 12% SOOL, and has seen a large decrease in its short position, which is down from 22% SOOL in August last year. Similarly to Moody’s, FIC has also seen its share price fall from $25 to $15 between August and now.

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Finally, we are going to take a look at the credit card company Visa Inc (NYSE:V) whose %SOOL has risen from 1% in July to 8% now. This short investment has been well timed, with investors coming to the trade last summer as the price started to fall – from $80 to $50, ebbing around this mark and then falling again from $50 to $40, as investors maintained their positions in anticipation of a further fall in price.

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Disclosure: None