Over the last two days, Berkshire Hathaway, Warren Buffett’s investment company, sold 1.7 million shares of their Moody’s investment. Once the sale was complete, Berkshire Hathaway still owned 11.9% of the company, which equates to 26.6 million shares. The average share price paid by Berkshire Hathaway is just over $60 per share.
Prior to June 2009, Berkshire Hathaway once had 48 million shares of Moody’s. The company received the shares as part of the spinoff of Dun & Bradstreet, with an overall cost base of about $10 per share. The stock once traded at $70 per share, but during the financial crisis their stock price dropped below $20 as the market crashed in 2009. When the price fell into the $20 range, Warren Buffett sold 15 million shares. The major bull market has pushed Moody’s share price back up to the $60 range again, so Warren Buffett decided to sell some more.
Warren Buffett was a fan of Moody’s because the company has a unique position in credit ratings. It is a wide moat business and it does not require a lot of capital. But Moody’s lost its greatest asset during the most recent financial crisis, which is its credibility. That’s a good enough reason for Warren Buffett to sell his shares.
Even though Warren Buffett and Berkshire Hathaway still own over 26 million shares of the company, it wouldn’t be surprising to see them continue to sell more. Watch closely to see what happens over the coming months and years.