Berkshire Decreases Moody's Stake: Smart Investing or Payback?

Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK.A) reduced its stake in Moody's Corporation (NYSE:MCO) by 17%, conducting the sale of almost 8 million shares over the open market in the past week. This comes after Moody's has posted 7 quarterly declines in a row.

Is this smart investing, or could it be bitter payback, as Moody's downgraded Berkshire Hathaway's credit back in March 2009?

Moody's fell on the news, and certainly looks to have had a very negative impact on it as it is down by almost 14% as of 8 AM.

Disclosure: No Positions

Comments

[ironhacker:]

"Is this smart investing, or could it be bitter payback, as Moody's downgraded Berkshire Hathaway's credit back in March 2009?"

The fact that you have to wonder speaks volumes about the conflict of interest problem.

Are there some companies that Moody's is afraid to downgrade? How many companies have a better rating than they deserve? Does the process work in reverse? Is there some way that companies get worse ratings than they deserve?

The credit rating agency business model is heavily dependent on the special status granted by the government. Are the agencies turning a blind eye towards the biggest debtor in the history of money?

Jul 23 10:58 AM

[weiwentg:]

I don't buy the conspiracy theories. Buffett said much earlier in the crisis that Moody's intrinsic value had declined, perhaps substantially. I only wonder why he didn't trim his position earlier.

Jul 23 11:36 AM

[4Foolz:]

"Is this smart investing, or could it be bitter payback, as Moody's downgraded Berkshire Hathaway's credit back in March 2009?"

- so Berkshire doesn't care about the other 17% of the company that they owns and the lost value of that position? Doesn't make sense...

Jul 23 02:53 PM

[long_on_oil:]

If it weren't for the fact that Moodys would have totally tanked, Buffet should have sold all of it. Like the rest of us, he is shedding the losers and redeploying the money.

Jul 24 11:17 AM

[Dave5577:]

Buffett will likely pick up some cheap shares of Moody's later on, after the carnage...or he has found some better values elsewhere, the only question is what took him so long to cut his losses...was he hoping for some kind of dead cat bounce????

Jul 24 01:19 PM

[deported:]

Don't ever second guess Warren Buffet. He's privy to the kind of information that makes billionaires. Legislation is in the works that will lessen the importance of the credit agencies. It's called due diligence.

Jul 24 02:29 PM

[helplessobs...:]

This looks like another Buffet misstep, sleeping at the switch instead of sniffing out the price trend a long time ago. This combined with selling index puts at the top of the market(when premiums are low)makes me wonder what's going on out in Omaha.

Jul 24 11:42 PM

[mkreisel:]

Buffett has owned MCO ever since 2000, his 48,000,000 shares have a cost of $499 million or rought $10 per share.

It means he is still selling out for a 150% profit in 8-9 years.

Jul 25 04:41 AM