Warren Buffett admits to a rare 'mistake'

Warren Buffett admits to a rare 'mistake'

The Oracle of Omaha said he made a mistake.

In his annual letter to shareholders of Berkshire Hathaway (BRKB), investing guru Warren Buffett disclosed that the company took an $11 billion writedown last year on its 2016 purchase of Precision Castparts, describing it as “a mistake.”

The 90-year-old billionaire, Berkshire’s chairman since 1970, said in the company’s annual letter to shareholders that the “ugly” writedown had a simple explanation.

“I paid too much for the company,” he said. “My miscalculation was laid bare by adverse developments throughout the aerospace industry.”

Despite that loss and fallout from the pandemic in general, the company’s operating businesses enjoyed a solid end to 2020. The sprawling conglomerate, which owns Geico, Dairy Queen, the Burlington Northern Santa Fe Railway Company, Duracell batteries and many other consumer, financial, industrial and energy companies, said Saturday it posted a net profit of $35.8 billion in the fourth quarter, an increase of 23%.

Berkshire’s operating profit rose nearly 14% in the quarter, to $5 billion.

The Oracle of Omaha goes to Hollywood

In the letter, Buffett also disclosed that Berkshire Hathaway’s annual shareholder meeting on May 1, normally held in Buffett’s home town of Omaha, Nebraska, will instead be livestreamed from Los Angeles so that vice chairman Charlie Munger, who lives in Southern California, can attend.

The 97-year old Munger did not attend last year’s virtual shareholder meeting in Omaha due to the Covid-19 pandemic. Instead, Buffett was joined on stage by another Berkshire vice chairman, Greg Abel.

“I missed him last year and, more important, you clearly missed him,” Buffett said of Munger, who is also chairman of California newspaper publisher Daily Journal (DJCO), which held its own shareholder meeting on Wednesday in Los Angeles.

Buffett said Abel and Berkshire’s third vice chairman, Ajit Jain, will also be on stage in LA to answer questions during the virtual May 1 meeting, which is scheduled to last from 1:30 p.m. ET until 5:30 p.m. Buffett said he hoped Berkshire can once again hold an in-person meeting in Nebraska in 2022.

As he often does in Berkshire’s annual letter to shareholders, Buffett — who has a net worth of some $90 billion — dispensed some words of wisdom about the current state of the market.

‘Hamburgers and Coke’

Buffett, however, defended the company’s investment strategy, describing it as like a classic diner.

“At Berkshire, we have been serving hamburgers and Coke for 56 years. We cherish the clientele this fare has attracted,” Buffett wrote.

Although he has dipped his toe into higher techs like Apple and Amazon (AMZN) recently, the majority of Berkshire’s investments are in slower growth “value” stocks such as Chevron (CVX), Verizon (VZ), American Express (AXP) and, yes, Coca-Cola (KO). (Buffett is an avid drinker of Cherry Coke.)

In other words, don’t expect Buffett to start investing in meme stocks like GameStop (GME) or momentum darlings such as Tesla (TSLA).

“The tens of millions of other investors and speculators in the United States and elsewhere have a wide variety of equity choices to fit their tastes. They will find CEOs and market gurus with enticing ideas,” he said. “Many of those investors, I should add, will do quite well.”

But Buffett stressed a more patient approach to investing.

“All that’s required is the passage of time, an inner calm, ample diversification and a minimization of transactions and fees,” he said.


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