Recent SEC Form 4 filings show Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) is continuing to trim its stake in Moody's (NYSE: MCO), selling 1.9 million shares in September and another 370 thousand earlier this week. Since Berkshire owns more than 10% of the company, it must notify the SEC of its sales within two business days rather than waiting until well after the end of the quarter when it will report its other U.S. listed stock holdings.
The Oracle of Omaha started selling his stake in Moody's in 2009, after he had amassed 48 million shares or 20% of the company. His sales have been at prices, far below the company's highs over $70/share reached in 2006 and early 2007, just ahead of the financial crisis. Since then, Buffett has continued to sell more Moody's shares almost every quarter, and Berkshire's stake in the company has fallen to 12%. He wisely took a selling break in the second quarter, when he testified before the Financial Crisis Inquiry Commission along with Moody's CEO. Since then, Buffett has resumed his sales, as expected.
While Buffett has never made statements suggesting regret over his Moody's investment, as he has with ConocoPhillips (NYSE: COP), it's hard to imagine that he's pleased. At the time Buffett purchased Moody's, the company and its competitors, Standard & Poor's (owned by McGraw-Hill (NYSE: MHP)) and Fitch, had unassailable competitive moats, a characteristic the Oracle covets in his investments. However, the rating agency's role in the financial crisis – assigning triple A ratings to junky mortgage securities – and the resulting financial reform bill passed by Congress make the moat appear more porous, though incredibly it is still standing.
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