Warren Buffett is quite possibly the greatest investor of all time. For decades, the CEO of Berkshire Hathaway — nicknamed the “Oracle of Omaha” — has shown his ability to read Wall Street like a book. He has a net worth of nearly $82 billion, according to Forbes, making him one of the richest people on the planet.
Despite his investing prowess, there have been a few Warren Buffett mistakes over the years. Unlike some executives who try to pass the blame to an underling, however, Buffett owns his errors and assumes full responsibility when he fails to deliver to shareholders.
If you’re trying to sharpen your investing game, you might learn a lot from Buffett’s recent regret decisions.
Investing in Tesco
Berkshire Hathaway owned 415 million shares of U.K.-based grocer Tesco at the end of 2012. The firm sold some stock but remained heavily invested. In 2014, the grocer overstated its profits and shares tumbled.
In his 2014 letter to shareholders, Buffett said concerns about Tesco management motivated his initial sale of stock, which resulted in a $43 million profit. Unfortunately, he didn’t move quickly on the rest.
“An attentive investor, I’m embarrassed to report, would have sold Tesco shares earlier. I made a big mistake with this investment by dawdling,” Buffett wrote. He admitted the move cost the company a $444 million after-tax loss. The lesson from this piece of Warren Buffett history is to make decisions promptly.
Using Berkshire stock to buy Dexter Shoe Co.
Warren Buffett hasn’t held back with his regrets over buying Dexter Shoe Co., but in his 2014 letter to shareholders, he expressed frustration over how he paid the $433 million purchase price. Rather than giving the sellers cash, he used Berkshire shares to fund the purchase. At the time he wrote the letter, he revealed that those shares were valued at $5.7 billion.
“As a financial disaster, this one deserves a spot in the Guinness Book of World Records,” he wrote.
You’re probably not buying and selling million-dollar companies, but you can learn from Buffett’s mistake by ensuring your resources are properly allocated. If your current portfolio is performing well, don’t pull money from solid investments to take a chance on a wild card.
Taking on debt from energy future holdings
In his 2013 letter to shareholders, Buffett explained his debacle with Energy Future Holdings. The equity owners ponied up $8 billion and borrowed even more.
“About $2 billion of the debt was purchased by Berkshire, pursuant to a decision I made without consulting with Charlie,” Buffett wrote, referring to Charles Munger, Berkshire Hathaway vice chairman.
Buffett correctly predicted Energy Future Holdings would file for bankruptcy. He said Berkshire Hathaway sold its holdings for $259 million in 2013, but not before suffering an $873 million pre-tax loss. The lesson of this Warren Buffett loss is to always run big decisions by a business partner or trusted confidant before diving in headfirst.
Opting not to buy Amazon stock
In a February 2017 interview with “Squawk Box,” Buffett was asked why he’d never bought stock in Amazon. He admitted he didn’t have a good answer.
“Obviously, I should have bought it long ago, because I admired it long ago,” he said. “But I didn’t understand the power of the model as I went along. And the price always seemed to more than reflect the power of the model at that time. So, it’s one I missed big time.”
Warren Buffett’s investments never include businesses he doesn’t understand, which is both good and bad. Backing companies blindly is not a smart move, but shying away from them isn’t wise, either. Partnering with someone whose strengths differ from yours can help you avoid missing out on great opportunities.
Overestimating select manufacturing, service & retail investments
In his 2015 shareholders letter, Warren Buffett highlighted the depth of Berkshire’s manufacturing, service and retail operations, noting that some businesses in the firm’s portfolio have poor returns, and he considers those serious mistakes.
“In most of these cases, I was wrong in my evaluation of the economic dynamics of the company or the industry in which it operates, and we are now paying the price for my misjudgments,” he wrote. “At other times, I stumbled in evaluating either the fidelity or the ability of incumbent managers or ones I later appointed.”
What you can learn from Buffett here is not to jump into investments blindly. If you’re not intimately familiar with a company, pass on it or seek advice from a trusted expert.
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