Even the oracles make mistakes.
Berkshire Hathaway grossed $ 42.5 billion in 2020, but on Saturday, CEO Warren Buffett admitted that the conglomerate’s results for the year included a rare “mistake” – which cost the company $ 11 billion.
Oracle of Omaha said in its annual letter to shareholders that its purchase of Precision Castparts in 2016 went wrong, forcing Berkshire to “write off” or deduct nearly $ 11 billion from its financial results last year.
Buffett called the company’s depreciation “ugly”. And he blamed himself, saying it was “almost entirely the quantification of a mistake I made in 2016”.
Berkshire, based in Omaha, Nebraska, bought the aerospace manufacturing company for $ 32 billion.
“I paid a lot for the company,” wrote Buffett, 90. “Nobody fooled me in any way – I was too optimistic about the CCP’s normalized profit potential.”
With airlines around the world flying far less in the past year due to the pandemic, the aerospace industry has suffered major disruptions, making 2020 a difficult year for the CCP.
“Last year, my miscalculation was exposed by adverse developments across the aerospace industry, the PCC’s most important customer source,” wrote Buffett.
Buffett maintained his position at the company and said he still believes that over time it will have good returns.
“I was wrong, however, in judging the average value of future earnings and, consequently, wrong in my calculation of the appropriate price to pay for the deal,” said Buffett. “The CCP is far from being my first such mistake. But it is a big problem. “
Berkshire Hathaway remains the most expensive stock on the market, with its lightly traded “A” shares closing Friday at $ 364,580, up about 6% since the beginning of the year. Its “B” shares, which were split up several years ago to create more easily traded shares, closed on Friday at $ 240.51, up about 7.5 percent this year.