TSRA, MCO, FDS, etc

TSRA -- today the PTO made comments about another patent and the stock reacted negatively again -- at least investors are consistent. No word on AMKR which is to be expected. I thought about that one some more and realized that TSRA has cancelled AMKR's license or at least they have tried to. Seems to me that is a sign of the current relationship -- rancorous at best. Probably not going to be a settlement in this case -- but the question is will AMKR try to appeal the arbitration hearing some how or will they accept the outcome and start paying? don't know. One other point would be that fundamentals have probably deteriorated while all this legal crap has been going on -- many signs of weakness in wireless markets.

MCO -- got some more detail on the business from a recent Merrill report. The analyst highlighted that there is a significant part of revenues that are relationship based -- i.e. ratings revenues that are more subscription vs. transaction based. These subscription revenues are holding up better in the downturn -- mostly on the financial institution front. There was some more detail on the ABS side -- some parts of the business are holding up better than others. Latest estimate (mine) is $1.7 bill in revenues (down from $2.259 bill in 2007) with about $700 mill in op profit, $430 mill in after tax net income which is about $1.75 or so in EPS depending on the share count.

So at $35 its around 20x 2008 estimates. I do not expect much growth in 2009 other than hoping for international, subscription and non-ratings revenues to grow. If you look at 1993-1997 you find that revenues didn't match 1993 peak again until 1996 but income didn't match 1993 peak until 1997. Today's years would be a peak of 2007, a new revenue peak in 2010 and a new income peak in 2011. So the stock is potentially trading at 14x 2011 estimates -- not exactly cheap. I plan on either selling or at least selling some calls to pull some money out in the meantime.

FDS -- had its first analyst day last week. Haven't seen the slides but basically the story was about the new products and features they were working on rather than any financial or market news. They didn't cover the size of the market or their penetration, etc. They were more subtle -- basically suggesting their growth would continue based on their ability to relentlessly provide clients with what they need/want. likely to keep growing despite industry issues.

UEPS -- SA is going to take their time on the welfare contracts -- may not have an answer for a year or two. plus the rand has dropped 18% this year so that explains much of the fall in the stock -- their earnings are in rand and then converted back to the dollar for reporting purposes. A falling rand means less EPS. this stock certainly is frustrating. still hopeful that fundamentals will win out in the end. they have a great story it just requires some patience.

Financial stocks -- I have a few now -- AB, DFR, FDS, MCO and CME. Other than DFR none have credit risk or funding issues yet they have all been hurt. Out of these I have the most confidence longer term in CME, AB, FDS and MCO. might reduce some exposure in the opposite order -- MCO and FDS. I would rather bet on derivatives growth then new issuance growth.