Market downturns offer an excellent opportunity to add shares of great stocks at a discount. After all, the basic goal is to buy low and sell high -- and hopefully, that sell is a long way down the road, after the stock has accumulated a lot of wealth.
There is one financial stock on my radar that has been one of the best, most consistent stocks for decades. Yet, it has had a rare downturn over the past year and is trading down about 18% year to date.
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Considering its market dominance, diversity of revenue streams, excellent track record, and discounted valuation, S&P Global (SPGI +1.26%) is just too tempting to ignore right now. S&P Global is a long-term winner that should be on your radar. Here's why.
S&P Global: Moat-protected
Few financial stocks have been as strong and as steady as S&P Global over the years.
Since 2008, it has had one calendar year when it was down: 2022, when it fell 29% during that year's bear market. Every other year, it has posted positive returns. Over the past 10 years, it has recorded an average annualized return of 16%, which beats the S&P 500's 12.7% average return over that period.
Its steady performance stems from its dominant position in two of its major business lines, with moats in both. Most know S&P Global as the company that owns the S&P indexes, as well as a controlling stake in the Dow Jones indices. S&P is one of three dominant players that basically control the space. And as the standard by which it is used as a benchmark and for exchange-traded funds (ETFs) to track, it is well shielded from disruption by other new competitors.
NYSE: SPGI
Key Data Points
The same applies to its credit rating business, and that moat is even wider. S&P Global is one of two firms, along with Moody's, that basically share control of 80% of the market. Fitch is a distant third. Its status in this business is fortified by regulators that designate it as a credit ratings agency, along with its reputation and the high switching costs involved with using another service.
S&P Global also has business lines that offer market intelligence and commodities insights for institutional customers, and these businesses tend to do well when markets are down, giving S&P Global great balance.
Ready to rebound
This has been a rare dip for S&P Global, caused by weaker-than-expected guidance. While S&P expects 6% to 8% revenue growth and 8% to 10% earnings growth, the rates are down from last year. That is due to the potential for lower equity market returns impacting indexes, a sluggish economy impacting credit ratings, and the spinoff of its mobility analytics division later this year.
These are short-term concerns. S&P Global is built for the long term. The opportunity to buy it at a 20% discount and at 21 times forward earnings is just too good to pass up.
On top of that, it is a Dividend King with 53 straight years of dividend increases. It's really hard to find a more reliable long-term financial stock than S&P Global to buy and hold.
