Banking, finance, and taxes

Buffett and Berkshire Selling Moody's: Target Zero Shares (MCO, BRK-B)

Moody’s Corporation (NYSE: MCO) may be back at the higher-end of its 52-week trading range with shares at $30.51.  But the glory days are long gone.  This was a $60 and $70 stock in 2007.  Berkshire Hathaway Inc. (NYSE: BRK-A, BRK-B) is still the largest shareholder of the company, but Warren Buffett keeps paring down his position.  Just yesterday came a filing showing that the Berkshire empire had unloaded more Moody’s stock.  Buffett may be selling this slow and orderly, but as far as we are concerned the Moody’s-Berkshire stake is on its way somewhere close to zero.

An SEC filing on Thursday showed that Berkshire Hathaway sold more than 205,000 more shares.  This takes the stake down to 30,786,876 shares.  The filing from yesterday showed 148,054 shares were sold on March 23 at $30.23, and then another 57,574 shares were sold on March 24 at $30.37.  Yesterday’s filing follows a earlier filing showing that some 816,000 shares had been sold.   As always, we have an index showing all of the most recent Buffett holdings.

Frankly, this is Buffett and friends at Berkshire are acting shockingly slowly.  The good news is that the stock has recovered handily from its lows. The bad news is that its glory days are gone and Chris Dodd has the so-called ‘independent ratings agencies’ in his crosshairs in his financial reform proposal.  Having all of these Triple-A ratings on extremely risky CLOs, CDOs and mortgage derivatives helped to sink the system.

Buffett has a “Forever” timeline when he invests.  When he bought the stake the ratings agencies looked untouchable and as though they had a license to steal.  Jim Cramer back in 2007 said something along those lines about a duopoly of the ratings agencies.  Getting hired to rate companies and issues, and getting paid based on continued favorable ratings — that is he conflict of interest that regulators are pursuimg.

Moody’s won’t be put out of business by the federal regulations.  Its future may be one of recovery.  But the glory days are gone.  Our take has been that Buffett needs to act faster and just get this one-off the Berkshire Hathaway books.  The fundamentals for the future of the company are much different from when Buffett got in, even if the forever scenario is reviewed. Hell, even owning the largest stake did not keep Moody’s from downgrading Berkshire Hathaway.  Unfortunately, the rate at which Berkshire Hathaway is selling Moody’s shares is one which will take years to reach zero.

This also illustrates a problem of Buffett or any others for that matter in being the largest shareholder of a stock and over that 10% threshold.  Getting out is much harder than getting in.

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