S&P Global (NYSE: SPGI) closed Friday at $418.80, about 28% below its 52-week high of $579.05. Visa (NYSE: V) and Mastercard (NYSE: MA) closed the same session about 3% and 5% below their own highs, respectively. It's a striking gap, because these three businesses have a lot in common.
All of them collect fees on activity flowing through their systems (card payments for the two networks, debt ratings and index licensing for S&P Global), and none of them takes on lending risk to earn those fees. This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia.
For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » And as of this week, all three share a prominent new shareholder. Pershing Square, the investment firm run by billionaire Bill Ackman, disclosed stakes of about $1.1 billion in each in its second-quarter 13F filing.
Why has one of the three spent the past year falling while the other two sat near record highs? Some of the gap is mechanical. On July 1, S&P Global completed the spin-off of its Mobility division, the auto-data business best known for CARFAX, handing shareholders one share of the newly independent Mobility Global for each S&P Global share they owned.
Those shares trade around $20 as of this writing. Add them back, and an investor who held through the separation is down closer to 24% from the high, not 28%. The rest is a rerating -- the market paying less for each dollar of earnings -- and it traces to the company's growth mix.
Second-quarter revenue, excluding the now-spun-off Mobility business, rose 11% year over year to $3.7 billion, and the headline businesses were excellent. Ratings revenue climbed 17% to $1.3 billion, accelerating from about 13% growth in the first quarter, while Indices, the business behind benchmarks like the S&P 500 (SNPINDEX: ^GSPC), grew revenue 20% to $534 million. "We delivered another strong quarter, with record results in two of our benchmark businesses," said CEO Martina Cheung in the earnings release, pointing to those two divisions.
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