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Warren Buffett's 8 worst investments: mistakes that cost him billions

Warren Buffett is a great investor, but still a man who tends to be wrong. In this article are the worst deals of the head of Berkshire Hathaway, which he later greatly regretted.

The legendary Warren Buffett is a role model and recognized guru in the investment world. Together with his friend and colleague Charles Munger, he has been running one of the most successful investment companies in the world for about 60 years - Berkshire Hathaway, which they built from a loss-making textile industry.

1. Dexter Shoe: "a financial disaster of the scale of the Guinness Book of Records"

Warren Buffett bought the shoe company Dexter Shoe in 1993 for $ 433 million in Berkshire Hathaway stock. In a letter to shareholders in 2007, Buffett admitted that his decision cost investors $ 3.5 billion.

“The purchase of Dexter Shoe is the worst deal I've done to date. But in the future, I will make even more mistakes - you can be sure,” Buffett wrote in a letter to shareholders.

He believed the company had a strong position in the market. “What I thought was a sustainable competitive advantage disappeared within a few years,” Buffett wrote. The company was ousted by foreign manufacturers, and eventually Buffett merged it with one of his businesses.

The use of Berkshire shares to buy Dexter Shoe is a major investor regret. In a letter to shareholders in 2014, he stated that he regretted not paying $ 433 million in cash for the business. He noted that at the time of writing, that stake could be worth $ 5.7 billion.

"In scale, this financial disaster deserves a place in the Guinness Book of Records," Buffett wrote.

2. Kraft Heinz: lost a lot of money, but still believes in the company

Kraft Heinz is a food and beverage company. The company was formed as a result of the Buffett-funded merger of Kraft and Heinz in 2015. Buffett owns 26% of the food giant.

After the merger of the businesses, things went very badly for the company: due to managerial mistakes of the new team, it began to lose its position in the market. Since going public in 2015, the company's shares have dropped nearly 50%.

Nonetheless, Buffett remains a shareholder in the company, receiving its dividends. Warren Buffett's future successor at Berkshire Hathaway, Greg Abel, said this spring that the company has confidence in the asset.

3. Anheuser-Busch InBev: minus $ 640 million due to an erroneous assumption

Anheuser-Busch InBev is an international brewing corporation. Buffett was the second largest shareholder in Anheuser-Busch prior to its merger with InBev; securities made up about 5% of Berkshire's portfolio and were worth more than $ 2 billion.

In July 2008, the Belgian-Brazilian InBev agreed to buy Anheuser-Busch for $ 52 billion. In August 2008, in an interview with CNBC, Buffett admitted that he sold Anheuser-Busch shares in the second quarter of the year for $ 1.36 billion, without waiting for the completion of the transaction, and it was a mistake. He did this because he assumed that the takeover would eventually fail.

4. IBM: an unsuccessful investment in a giant that cannot keep up with time

IBM is an American corporation engaged in the production of computer hardware and software, founded in 1911. Buffett began investing in IBM back in 2011, having bought 64 million shares at that time for more than $ 10 billion.

The transition from traditional IT solutions to cloud technologies negatively affected IBM, which only later began to actively develop this line of business. In 2017 and 2018, Buffett sold off most of his stake in the company. At the time of the sale, the shares were 18% cheaper than the price at which the investor bought them.

5. Tesco: Too Delayed Deciding to Get Rid of a Troubled Company

Tesco is a British international supermarket chain founded in 1919. In 2006, Buffett bought a small stake in the company, and subsequently invested more than $ 2.3 billion in it, despite the fact that problems were brewing in the company.

When Tesco reported accounting problems in 2013 and its stock price plummeted, Buffett began selling stock. In 2015, in a letter to shareholders, the investor admitted that he made a mistake by selling Tesco too late - it cost Berkshire Hathaway a loss of $ 444 million.

“I am ashamed to admit, but I should have sold Tesco shares much earlier. I made a big mistake by taking the time,” Buffett wrote in a letter to shareholders.

6. ConocoPhillips: Emotional Purchase That Ends in Loss of $ 2 Billion

ConocoPhillips is an American oil and gas company founded in 1875. Buffett bought a stake in the company in 2008, when oil prices were at an all-time high, investing $ 7 billion in it.

Subsequently, however, ConocoPhillips shares fell due to the decline in oil prices. As a result of the unsuccessful deal, Buffett lost almost $ 2 billion. He later admitted that he bought shares on the euphoria from soaring oil prices.

“Not persuaded by either Charlie [Charlie Munger - Vice Chairman of Berkshire Hathaway] or anyone else, I bought a large number of ConocoPhillips shares when oil and gas prices were near their peaks. I was by no means expecting the sharp drop in energy prices that happened later,” Buffett wrote in a letter to shareholders in 2008.

7. General Reinsurance: too much additional issue for the sake of investment

The purchase of the reinsurance company General Reinsurance (Gen Re) in 1998 was initially not the best decision of Warren Buffett, but later he was pleased with the results of this business.

“After a series of challenges, General Re has become a great insurance company that we value highly. However, it was a terrible mistake on my part to issue 272,200 shares of Berkshire Hathaway in order to buy General Re - this increased our issued shares by a whopping 21.8%. Because of my mistake, Berkshire Hathaway shareholders have “given away” much more than they received (a practice that, despite biblical approval, is not nearly as desirable when you buy a business),” Buffett wrote in his letter to shareholders in 2016.

In a letter to shareholders in 2001, Buffett detailed why the deal was not successful. Berkshire Hathaway suffered $ 800 million in losses due to General Re's failure to pay policy compensation in 2001, when the September 11 attacks took place in the United States.

8. Berkshire Hathaway: Buffett's $ 200 Billion Mistake

Berkshire Hathaway is a Nebraska-based holding company founded in 1839. Ironically, it ranks among Warren Buffett's worst investments, in his own opinion. The legendary investor first invested in Berkshire Hathaway's textile production in 1962 and bought it out in full in 1965. At the time, the company was valued at approximately $ 22 million.

Buffett tried unsuccessfully to grow Berkshire Hathaway's textile business for 20 years - until 1985, when he eventually closed it. In a 2010 interview, he admitted that he bought and tried to revive the firm "to spite" its former boss, a move that cost him roughly $ 200 billion. Buffett called Berkshire Hathaway the "wackiest" stock he ever bought.

“I invested a large sum of money in a terrible business ... If instead of investing in the textile business, we started right away with an insurance company, Berkshire Hathaway would have cost twice as much as it is now,” Buffett admitted.

Now the investment company Berkshire Hathaway is in high demand among investors and belongs to the category of undervalued but promising value investing.


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