A combined $140 billion in market capitalization has softened in recent months as shares of Visa (V +0.76%) and Moody’s (MCO 0.45%) – two cornerstone holdings of Warren Buffett’s Berkshire Hathaway – have underperformed. This isn’t a story of fundamental weakness in these companies, but a demonstration of how even the most formidable “moats” can be tested by external pressures and market sentiment. Follow the money, and the picture reveals a temporary dislocation, not a systemic failure, in two businesses that have consistently delivered outsized returns for over a decade.
The numbers tell a clear story of recent reversal. Year-to-date, Moody’s is down 12%, with a 14% decline over the past year. Visa isn’t far behind, dipping 8% YTD and 10% over the last 12 months. These figures are particularly striking when viewed against their historical performance: Visa has averaged a 16% annualized return over the last decade (19% since its 2008 IPO), while Moody’s has consistently delivered 17% annually for the past 10 years (15% since 2008). The current downturns represent a significant deviation from the norm, prompting a reassessment of risk versus reward.
Both companies benefit from a duopolistic structure. Moody’s and Standard & Poor’s Global effectively split the credit rating agency market, each holding roughly 40% market share. Similarly, Visa, with a 52% share, and Mastercard together control approximately 75% of the payment processing landscape. This dominance creates substantial barriers to entry, a key component of Buffett’s investment philosophy. Berkshire Hathaway currently holds Moody’s as its sixth-largest holding and Visa as its thirteenth, underscoring the confidence placed in these long-term positions. However, even seemingly impenetrable moats aren’t immune to disruption.
Source material: The Motley Fool.
The pressure on Visa stems largely from the Credit Card Competition Act, a piece of legislation gaining traction in Washington. The bill aims to introduce competition to the Visa and Mastercard duopoly by requiring banks to offer merchants a choice of at least two credit networks per transaction. While the bill’s passage remains uncertain – the industry is actively lobbying against it – the mere threat has weighed on investor sentiment. This is a classic example of regulatory risk impacting market valuations, even as Visa continues to demonstrate strong underlying performance. In the most recent quarter, Visa’s revenue grew 15% year-over-year, with earnings climbing 17%, and the company projects low-double-digit growth for both metrics in 2026.
Moody’s’ recent stumble, however, is a case of guilt by association. The company’s stock price declined following a disappointing revenue outlook from its primary competitor, Standard & Poor’s Global. Despite Moody’s itself exceeding estimates in the December quarter – with revenue up 13% year-over-year and earnings surging 57% – the market reacted negatively to the broader industry sentiment. This highlights the interconnectedness of even dominant players within an oligopoly; a weakness in one can temporarily drag down the other, regardless of individual performance. Moody’s is currently guiding for 10% to 14% earnings per share growth in 2026, a robust outlook that seems disconnected from its current valuation.
Currently, 90% of analysts recommend Visa as a buy, with a median price target indicating 27% upside. Moody’s is also favored by analysts, with 67% issuing buy ratings and a median price target suggesting a 30% gain. Furthermore, both stocks are trading at valuations near their lowest points in recent years – Moody’s since 2023 and Visa since 2025. These metrics suggest a potential buying opportunity for investors with a long-term horizon.
What this means for your wallet: Keep a close watch on the Credit Card Competition Act’s progress in Congress. If the bill stalls, expect a rebound in Visa’s stock price. More importantly, monitor the earnings reports of both companies in the coming quarters. If they continue to demonstrate strong growth despite the headwinds, the current dip could represent a significant entry point for investors. The question isn’t if these companies will recover, but when – and whether you’ll be positioned to benefit from their eventual bounceback.
