As Buffett Dumps Moody's (BRK-A, MCO)

Warren Buffett is dumping Moody’s Corp. (NYSE: MCO).  We’ll never know until it is already done whether the Oracle of Omaha wants to jettison it entirely from the holdings of Berkshire Hathaway Inc. (NYSE: BRK-A), but he has already lightened up twice in his stake, most recently this last week.  If you listened to Buffett on a CNBC call this morning after his Burlington Northern Santa Fe (NYSE: BNI), a simple interpretation is that he might just be booting all of his Moody’s position.  Our only criticism over this is that Buffett had enough foresight and knowledge that he could have come to the very same conclusion over a year ago at much higher prices.

And then our friend over at OptionHawk.com sent us this today regarding increased options trading: MCO traded a massive bearish collar as 10,000 December $26 calls are bought at $0.70, 10,000 December $20 puts are sold at $0.90, and a block of 550,000+ shares are shorted…. Shares of the credit services firm are in a channel down formation with the next target of $21….

David Einhorn of Greenlight Capital noted a short sale that had been placed a while ago (noted in September) was in Moody’s Corp. because of his belief that the models of the ‘independent ratings agencies’ are going to permanently change.

We had also noted that this should be a position to dump back on July 27 when the stock was at $26.64 for the same reasons after he disclosed his first sale.

We have seen severe conflicts and troubles at Moody’s (and S&P for that matter) that we started covering all the way back in mid-2007 on this sector.  You can argue that it was at a different time in the financial and political world, but Buffett could have saved massive amounts of money had he started getting out when the game became a game which was at risk rather than after the game was up.

This morning he told CNBC regarding any actions of his huge stake in Moody’s, Buffett effectively that you’d have to make your own guess on what was going to happen to his stake there.  Our guess is that Berkshire Hathaway has signaled an exit here.  Even if that was not Buffett intent, his views on Moody’s long-term prospects cannot be anywhere near what they used to be.

JON C. OGG