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You don’t amass a net worth of around $92 billion by making regular mistakes, so I think we can cut Warren Buffett some slack for this one.

Still, in his recent letter to shareholders of Berkshire Hathaway, Buffett did admit that the company’s 2016 purchase of Precision Castparts Corp (PCC) was a “mistake”, and a costly one at that.

Buffett, the chairman of Berkshire Hathaway since 1970, said the company took an $11 billion writedown last year on the $32,1 billion purchase

Below via Reuters:

…the coronavirus pandemic sapped demand for air travel and the Portland, Oregon-based unit’s products.

In his annual letter to investors, Buffett said he bought “a fine company – the best in its business,” and Berkshire was “lucky” to have Precision Chief Executive Mark Donegan still in charge.

But Buffett said he was “simply too optimistic about PCC’s normalized profit potential.”

Precision shed more than 13,400 jobs, or 40% of its workforce, in 2020, and only recently has begun to improve margins, Berkshire said.

“I was wrong … in judging the average amount of future earnings and, consequently, wrong in my calculation of the proper price to pay for the business,” Buffett wrote. “PCC is far from my first error of that sort. But it’s a big one.”

Over the years, Buffett has often been upfront about his missteps, saying he “overpaid” for Kraft Foods back in 2015, and calling his 1993 purchase of Dexter Shoe his “worst deal” ever.

He admitted to that mistake in his 2008 annual letter, adding “I’ll make more mistakes in the future – you can bet on that.”

I guess he was true to his word.

To be fair to Buffett, it’s certainly not all doom and gloom, as CNN reports:

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.

When your biggest blunder still results in an operating profit of $5 billion, you’re not doing too badly.

The investment guru went on to say that while Berkshire dabbles in tech giants like Apple and Amazon, he prefers long-term, slower growth “value” stocks such as Chevron (CVX), Verizon (VZ), American Express (AXP) and Coca-Cola (KO).

Something to consider if you’re dabbling in international investment.

[sources:reuters&cnn]