Moody’s Corp. (NYSE: MCO) is one of those companies that went from being highly respected before the recession to the scourge of humanity for missing the writing on the wall that led to the credit meltdown in 2007 and 2008. Well, let’s just say that Moody’s survived and then some.
Revenues in 2006 totaled $2.04 billion, up 18% from 2005. Revenues troughed at $1.75 billion in 2008 and grew marginally again in 2009 to $1.79 billion. Operating income and earnings per share tanked during the dark days, but by 2015 the revenue was almost $3.5 billion with almost $1.5 billion in operating income. Buffett had to take some small hazing during and after the recession for his praise of the “charge for ratings” in the prior decade, but he was proven right after its model was changed and after the credit ratings survived.
In mid-2010 (before its split), Nike Inc. (NYSE: NKE) was a stake of over 7.6 million shares, but Buffett or his team decided to begin selling before the end of 2010. It might seem fair to ask what on earth they were thinking, particularly since Nike has even become a DJIA component since that time.
In an effort to eliminate the Monday-morning quarterbacking efforts here, the reality is that Nike’s shares always have been expensive from a valuation basis. That might have led Buffett’s team to exit. Then there is the notion that Nike’s stock was from the GEICO portfolio, and the auto-insurance subsidiary had previously been managed by Simpson before he retired. Different team, different views. Nike’s market capitalization has now risen to $100 billion.
Buffett piggybacked his stake in Republic Services Inc. (NYSE: RSG) with his buddy, Bill Gates. Republic has a highly defensive business model with waste management efforts, and the reality is that the business of garbage collection and disposal is something that society may not like on the surface but nonetheless has to live with. If you have ever been on the streets of New York City at 4:30 a.m., imagine what the garbage piles would look like (let alone smell like) if that were to pile up for a month.
Buffett sold during the third quarter of 2010 when shares averaged about $28. Its latest price was over $45, and the 2010 annualized dividend of $0.80 per share has grown to $1.20 now. This is a business that still matches the Buffett mentality. Perhaps Buffett just did not want too many investments and trades tied up with Gates, or maybe he did not want the dirty and environmental association of garbage.
Over the years, Walt Disney Co. (NYSE: DIS) has become a seriously great media and entertainment giant. It has also become a stake sale twice under Buffett and his team for what might have otherwise become billions worth of profits. Buffett first took a 5% stake for a mere $4 million back in the 1960s, but he took roughly a 50% profit shortly after buying the stock. Buffett then again became a Disney shareholder by getting 21 million shares or so when Disney acquired Cap-Cities/ABC for a $300 million or so value of his stake then. Buffett then sold those shares.
There are of course no assurances that Buffett would have known that Disney would go on to acquire Pixar, Marvel and Star Wars, nor that Disney would see such large international growth. Disney’s dividend is literally seven times what it was in 2000. This is a company in which Buffett could have added and added shares, as now its market cap is close to $170 billion.