MSCI after the drop: Why I'm not selling and still see it as an attractive long-term opportunity $MSCI
MSCI is down sharply today after earnings. At first glance, it might seem like something went wrong at the company.
But I see it differently.
For me, the investment thesis hasn't changed at all.
On the contrary, when such sell-offs happen with quality companies, I usually pay even more attention to them.
What actually happened?
The company reported results that were generally solid.
Revenue rose about 12% year-over-year.
The business continues to grow.
Assets linked to MSCI indexes are increasing.
Recurring revenues remain very strong.
However, the market was disappointed by the increase in expected costs for this year.
The reasons are mainly investments in further growth, higher employee compensation, and the acquisition of First Street.
That was the main reason for today's stock decline.
Why am I not too concerned?
When investing, I always try to distinguish between:
business deterioration,
and short-term margin pressure.
In my view, we're not seeing business deterioration today.
We're seeing a company that is still growing, investing in the future, and will have higher costs in the short term.
Those are two completely different things.
Why I think MSCI is an exceptional company
MSCI is not just a "company that makes indexes."
Its indexes are used by virtually the entire investment world.
ETFs, active managers, pension funds, hedge funds, and institutional investors.
If you manage billions of dollars, changing a benchmark is not an easy decision.
That's exactly why MSCI has a huge competitive moat.
That creates a very strong moat.
A business I love
There are several things I like about MSCI:
extremely high margins,
minimal capital requirements,
recurring revenues,
high return on capital,
regular share buybacks,
EPS growth driven not only by business growth but also by buybacks.
In my opinion, exactly these types of companies can be held for decades.
The valuation is looking more interesting now
After today's drop, MSCI is trading at roughly 31 times expected earnings.
It's not an outright cheap stock.
On the other hand, this is a significantly lower valuation than what we've been used to for MSCI in recent years.
If the company can grow at a double-digit rate over the long term and continue buying back shares, I think it's a very high-quality compounder.
My perspective
I personally am not selling my MSCI shares.
On the contrary.
If the investment thesis hasn't changed and the market is mainly reacting to a short-term cost increase, I see such declines as an opportunity rather than a reason to panic.
Of course, I don't expect the stock to surge tomorrow.
But with a 5–10 year horizon, I'm much more interested in whether the company will continue to grow its earnings, free cash flow, and shareholder value.
And so far, I see no reason to think that this story is over.
How do you see it? Are you using today's dip to buy more, or do you think MSCI is still too expensive even after the drop?
