14 Jan 2013 Chuck Akre recommends Moody's ( Portfolio )
"Moody's is a company that is certainly not without its controversies," admits Chuck Akre. That's quite an understatement. The ratings agency was famously vilified during the financial crisis for awarding gilded AAA ratings to toxic debt. But Moody's survived -- and Akre thinks its future is bright. The money manager, whose $1.2 billion Akre Focus Fund (AKREX) has returned 15% a year since 2009, besting 84% of peers (after he averaged 12.6% a year for more than a decade at his previous fund), notes, "You can't go to the debt market without one of their ratings, period." As a result, Moody's has "fabulous pricing power," which is why it generates free-cash-flow margins of nearly 30%.

The stock has been on a tear recently, but Akre thinks that at 16 times next year's earnings -- half its pre-crisis valuation -- it remains a bargain because of the lingering damage to its reputation. Moody's could actually benefit from the crisis in Europe, he says. As banks there stop lending, companies will have to issue bonds if they want to raise cash. Akre also likes Moody's prospects in the U.S.: "The need for debt financing in this low-interest-rate environment is staggering."