Even oracles make mistakes.
Berkshire Hathaway earned $ 42.5 billion in 2020, but CEO Warren Buffett admitted on Saturday that the conglomerate’s results for the year contained a rare ‘mistake’, which cost the company $ 11 billion.
The Oracle of Omaha said in its annual letter to shareholders that its acquisition of Precision Castparts went bad in 2016, forcing Berkshire to ‘write off’ or write off nearly $ 11 billion of its defeat last year.
Buffett described the write-off on the company as ‘ugly’. And he blamed himself, saying it was ‘almost the quantification of a mistake I made in 2016’
Berkshire, based in Omaha, Nebraska, bought the aviation manufacturing firm for $ 32 billion.
“I paid too much for the company,” Buffett, 90, wrote. “No one misled me in any way – I was simply too optimistic about PCC’s normalized profit potential.”
As airlines worldwide have flown far less in recent years due to the pandemic, the aviation industry has suffered major disruption, making 2020 a difficult year for PCC.
“Last year, my miscalculation was exposed by unfavorable developments in the aerospace industry, PCC’s main customer source,” Buffett wrote.
Buffett stood his ground in the company, saying he still believes it will return good returns over time.
“However, I was wrong in judging the average amount of future earnings and consequently wrong in my calculation of the right price to pay for the business,” Buffett said. ‘PCC is far from my first mistake of its kind. But this is a big one. ‘
Berkshire Hathaway remains the most expensive stock on the market, with its A-shares trading lightly closing at $ 364,580, up 6 percent since the beginning of the year. Its B shares, which were split a few years ago to create an easier-to-trade stock, rose to $ 240.51 on Friday, up about 7.5 percent this year.