Summary: S&P Global and Moody’s certify and provide quality ratings for many major financial instruments in global capital markets, giving them a powerful position in the current environment.
S&P Global Inc and Moody’s are global firms that provide financial data analytics solutions to companies in the capital and commodity markets. Their services cut across credit ratings, benchmarks, data, digital and traditional financial research and analytical tools.
The companies operate several business segments like market intelligence, ratings, commodity insights, mobility, engineering solutions and indices services. The S&P Global’s rating agency is the biggest amongst its business segments accounting for about 49% of revenues in FY2021. In the first quarter of 2022, the company recorded revenue of $2.39 billion showing an 18 percent growth when compared to the $2.02 billion recorded in the first quarter of 2021.
S&P Global and Moody’s make up a duopoly that dominate the financial intelligence, data analytics, credit ratings and certifications industries globally. They certify the quality of many financial instruments in most global capital markets, giving investors the confidence to buy, sell or create these instruments. They also provide access to financial and industry news, analysis, data, and many more services.
Both companies have seen significant revenue growth and are very competitively successful, owning strong moats around their brand, access, and technical know-how. They also have a strong market share between them (with S&P Global alone controlling 80% of the agents rating business) and a stable-to-growing demand which are based on investors’ and players’ growing need to tap into the markets this period. So we believe that these companies will continue to do well and deliver strong investment returns in the future.
Risks: Some of the risks associated with the S&P Global Inc. include being vulnerable to proceedings, investigations and inquiries with respect to the ratings provided, leading to legal charges, damages or fines.
However, despite these risks, we believe strongly in their fundamentals and the stability of demand and will be adding them to our portfolio.