Berkshire Hathaway, Moody's: Collateral Damage

NEW YORK (TheStreet) -- Berkshire Hathaway (BRK.A Quote) Chairman Warren Buffett can't be very happy about the performance of Moody's Investors Service (MCO Quote) in recent days, but, fortunately for his investors, the ratings giant accounts for less than half a percent of Berkshire's massive holdings.

Despite reducing its holdings twice since late July, Berkshire still owns 16.6% of Moody's. Berkshire's 39.2 million shares are worth just under $740 million going into the open Monday -- a hefty sum, unless one considers Berkshire's market cap of $153.7 billion. Even if Buffett lost the whole investment, which is hard to imagine, he could still take a big write-off to offset a portion of the more than $3 billion he's already made on paper with his investment in Goldman Sachs last year.

For the rest of Moody's shareholders, Buffett's actions should be of paramount interest, as this is not an instance when the savvy investor is selling into strength.

The ratings agencies are facing legal and regulatory threats linked to the role they played in the boom and bust in structured finance, where banks including Citigroup(C Quote), Goldman Sachs(GS Quote), Morgan Stanley (MS Quote) and JP Morgan Chase(JPM Quote) pooled ever-more-dubious home loans into bonds that were sold to investors. Many view the agencies as complicit in the wild popularity of these investment vehicles because they assigned triple-A ratings to many of the securities, dramatically understating their risk.

Moody's shares were down 3.7% Friday to $18.85 on more than triple the issue's average daily volume. The stock has lost more than 28% since Sept. 16, when it briefly touched $25.92. Shares of McGraw-Hill Companies, parent of credit ratings agency Standard & Poor's, have fallen 16% during that same period.