Warren Buffett is quite possibly the greatest investor of all time. A stock market player since age 11, he has a lifetime of stock-picking experience that has served him well.
For decades, the Berkshire Hathaway CEO — nicknamed the “Oracle of Omaha” — has shown his ability to read Wall Street like a book. He has a net worth of nearly $75 billion, according to Forbes. That makes 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 can glean a lot from both Buffett’s wins and losses. Take a look at 10 Warren Buffett failures to see what went wrong, and what you can learn from his hard-earned wisdom.
1. Buying Berkshire Hathaway
In a 2010 interview with Becky Quick on CNBC’s “Squawk Box,” Buffett said, “The dumbest stock I ever bought was — drum roll here — Berkshire Hathaway.”
Buffett explained that he first invested in Berkshire Hathaway in 1962, when it was a failing textile company. He thought he would make a small profit when more mills closed, so he loaded up on stock.
He met with company management and agreed on a price to tender stock. But later, the firm tried to chisel Buffett out of more money. Angry, a spiteful Buffett bought control of the company, fired the manager and tried to keep the textile business running for another 20 years. Buffett estimated this vindictive move cost him $200 billion. He would have been better off buying a good insurance company, he said.
The lesson is not to let emotions factor into investment decisions. Whether you’re feeling vengeful like Buffett was or have a soft spot for a sinking ship, money moves should always be based on facts, not emotions.
2. Investing in Tesco
Berkshire Hathaway owned 415 million shares of the U.K.-based grocer Tesco at the end of 2012. The purchase price was $2.3 billion. By the end of 2013, Berkshire Hathaway had sold 114 million shares of the company, but still owned more than 301 million, which put the firm in a vulnerable spot.
In 2014, shares in the grocery chain tumbled more than 48 percent, when the organization overstated its profits. In his 2014 letter to shareholders, Buffett said concerns about Tesco management motivated his initial sale of stock. That move resulted in a $43 million profit. Unfortunately, he didn’t move fast enough on the remaining 301 million shares.
“Attentive readers will notice that Tesco, which last year appeared in the list of our largest common stock investments, is now absent,” Buffett wrote. “An attentive investor, I’m embarrassed to report, would have sold Tesco shares earlier. I made a big mistake with this investment by dawdling.”
He admitted the move cost the company a $444 million after-tax loss — approximately one-fifth of 1 percent of the firm’s net worth. The lesson from this Warren Buffett failure is to make decisions promptly. If you know an investment isn’t right, get out instead of being part of a company’s downfall.
Related: Is This Man the Next Warren Buffett?
3. Purchasing Dexter Shoe Co.
In 1993, Warren Buffett purchased Dexter Shoe Co. for $433 million in Berkshire Hathaway stock. Initially, he thought the brand had a competitive advantage, but this faded a few years later.
In his 2007 letter to shareholders, Buffett explained the poor decision, admitting it cost investors $3.5 billion. At the time, this was 1.6 percent of Berkshire Hathaway’s net worth.
“To date, Dexter is the worst deal that I’ve made. But I’ll make more mistakes in the future — you can bet on that,” Buffett wrote.
Warren Buffett’s worst investment underscores a key lesson: A company is at its best if it has a viable competitive advantage. If there’s no solid reason for customers to continue patronizing the brand — like the brand offering good prices, unique products or second-to-none craftsmanship — they probably will not.
4. Taking on Debt From Energy Future Holdings
In his 2013 letter to shareholders, Buffett wrote, “Most of you have never heard of Energy Future Holdings. Consider yourselves lucky; I certainly wish I hadn’t.” He explained that Energy Future Holdings was formed in 2007 “to effect a giant leveraged buyout of electric utility assets in Texas.”
The equity owners ponied up $8 billion, then borrowed a massive amount 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. “That was a big mistake.”
Buffett went on to predict Energy Future Holdings would file for bankruptcy in 2014, which it did. Buffett explained that Berkshire Hathaway had sold its holdings for $259 million in 2013. In total, Buffett divulged that his firm suffered an $873 million pretax loss. Next time, he said he’d be sure to consult Munger, who long has been Buffett’s right-hand man.
Warren Buffett mistakes can be costly. If you want to build a net worth like Buffett’s, acknowledge you don’t know everything. Run big moves by a business partner or another trusted confidant before diving in headfirst.
5. Not Buying the Dallas-Fort Worth NBC Station
Not all Warren Buffett failures involve losing money. One of his regrets is not buying the Dallas-Fort Worth NBC station for $35 million, which would’ve given him the chance to earn some major cash.
In his 2007 letter to shareholders, Buffett explained he passed up the chance to purchase the station around the time he bought See’s Candies in 1972. He turned down the offer despite wholeheartedly trusting the person who offered him the station, knowing there was excellent growth potential and it would require essentially no capital investment.
“Why did I say ‘no’? The only explanation is that my brain had gone on vacation and forgot to notify me,” Buffett wrote.
Reminiscing on the missed opportunity, Buffett pointed out that the station earned $73 million pretax in 2006 and at the time he wrote the letter, was valued at $800 million.
The moral of the story is that when opportunity knocks, take advantage of it. Conduct your own research prior to buying, but take advantage of the wealth opportunities trusted connections bring to you.
6. Issuing Extra Shares of Berkshire Hathaway to Buy General Reinsurance
The 1998 purchase of General Reinsurance was initially one of Warren Buffett’s failures. He’s since turned it around, but that doesn’t mean he’s free of regrets.
“After some early problems, General Re has become a fine insurance operation that we prize,” wrote Buffett in his 2016 letter to shareholders. “It was, nevertheless, a terrible mistake on my part to issue 272,200 shares of Berkshire in buying General Re, an act that increased our outstanding shares by a whopping 21.8%. My error caused Berkshire shareholders to give far more than they received (a practice that — despite the Biblical endorsement — is far from blessed when you are buying businesses).”
Buffett offered more insights on some of reasons for the hit in his 2001 shareholders’ letter. They included underwriting losses, overlooking the possibility of terrorist attacks and failing to realize General Re didn’t have enough in the reserves to pay losses from old policies. Berkshire Hathaway took an $800 million hit from the latter in 2001.
One key takeaway here is to always double-check the numbers and run them by several trusted advisors. Another is fix your mistakes the right way, and you’ll often be rewarded.
7. Buying a Large Amount of ConocoPhillips Stock
In his 2008 letter to shareholders, Buffett wrote, “Without urging from Charlie or anyone else, I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year.”
Buffett explained he still believed the price of oil would rise in the future, but acknowledged that at the time, it wasn’t happening. He said the poor timing of his purchase cost the firm several billion dollars.
When he wrote the letter in 2008, Berkshire Hathaway owned nearly 85 million shares of ConocoPhillips. Buffett had spent just over $7 billion on the purchase, but its market value at the time of the letter was only about $4.4 billion.
Warren Buffett mistakes like this one again emphasize the importance of consulting those you trust before making a major investment. Others might be privy to information to which you don’t have access. Or, they might simply offer a different perspective that can help you see the move in a different light.
8. Failing to Dig Deep About David Sokol’s Lubrizol Corp. Stock
In 2011, Warren Buffett and Berkshire Hathaway were under fire after it was revealed that David Sokol, then-chairman of several of the firm’s subsidiaries, pitched Lubrizol Corp. to Buffett as a potential takeover. The problem was that Sokol had recently purchased stock in the chemicals company.
Shortly after, Berkshire agreed to buy Lubrizol for roughly $9 billion — a move that earned Sokol a $3 million profit. Since Sokol hadn’t disclosed his recent purchase of Lubrizol shares to Buffett, this violated insider-trading rules.
“In our first talk about Lubrizol, Dave mentioned that he owned stock in the company,” Buffett wrote in a 2011 press release announcing Sokol’s resignation. “It was a passing remark and I did not ask him about the date of his purchase or the extent of his holdings.”
Buffett didn’t realize his mistake immediately, but he owned up to it when he did. At the 2011 Berkshire Hathaway annual meeting, he admitted he was wrong for not asking Sokol when the latter bought the shares.
The takeaway here is don’t be too trusting. Ask more questions than you think are necessary, because you can’t be too careful when your reputation is on the line.
9. 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 regretfully responded that 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.”
Buffett famously shies away from investments he doesn’t understand, which is both good and bad. It’s never wise to back companies blindly, but shying away from the unknown doesn’t make for a savvy investor, either. Instead, it’s best to partner with someone whose strengths differ from yours, so you can complement one other.
The magnitude of Buffett’s decision not to invest in Amazon will never be known, but consider the potential: Amazon issued an IPO at $18 per share in May 1997. As of April 25, the stock was valued at $907.62 per share — about 50 times its initial purchase price.
10. Purchasing US Airways Stock
It’s not an actual Warren Buffett failure, but his regret over getting involved with US Airways is worth noting. In 1989, he purchased $358 million worth of shares in the now-consolidated airline.
The shares never appreciated, but after weathering turmoil, Forbes reported that Buffett likely got all his principal and dividends back. Despite not actually losing money, Buffett has been rather vocal about what he considers to have been a poor investment decision.
“The resuscitation of US Airways borders on the miraculous,” Buffett wrote in his 1997 letter to shareholders. “Those who have watched my moves in this investment know that I have compiled a record that is unblemished by success. I was wrong in originally purchasing the stock, and I was wrong later, in repeatedly trying to unload our holdings at 50 cents on the dollar.”
Buffett credited the airline’s rebound to both his and Munger’s exit from the board and the arrival of CEO Stephen Wolfe. He praised the latter for saving what could’ve been a very costly investment.
“It is now almost certain that our US Airways shares will produce a decent profit — that is, if my cost for Maalox is excluded — and the gain could even prove indecent.”
The moral of the story is to extensively research every investment before buying so you know exactly what you’re getting into. Also, it’s probably best to let the company run itself, rather than getting involved with an unfamiliar industry.