What Mistakes Has Warren Buffett Made?

Warren Buffett is widely regarded as the most successful investor of all time, a reputation that has recently been cemented by his Berkshire Hathaway conglomerate becoming the first non-tech company to achieve a $1 trillion market capitalization.

Despite his obvious successes, though, Buffett has made plenty of mistakes over the years, some of which have cost Berkshire billions of dollars.

Let’s take a look at how Warren Buffett views his own investment performance and examine some of the legendary investor’s biggest mistakes.

Buffett’s Own Analysis of His Track Record

Over the decades, Warren Buffett has been reasonably humble about his own investing prowess. In fact, he attributes most of his success to only about a dozen excellent investment decisions, or one roughly every five years. The rest of his investing activity over his more than 60-year career has done comparatively little to move the needle.

Buffett is also known to keep an unofficial internal record of his investment mistakes. This record, he says, accounts more for mistakes due to inaction than those caused by poorly thought out action. These sins of omission, as Buffett ofter refers to them, can often be even more costly than bad investment decisions.

So to the question what mistakes has Warren Buffett made? By failing to buy Alphabet and Amazon, Warren Buffett says he cost Berkshire Hathaway shareholders billions in opportunity cost. But the answer is much more nuanced than those two missed purchases. 

Paramount

The most recent example of a mistake by Buffett was Berkshire’s stake in Paramount. In 2022, Buffett purchased about 91 million shares at an estimated cost of $2.7 billion.

At the time, Paramount’s streaming service appeared to have potential and the stock looked as though it may have been undervalued.

By 2023, though, Berkshire was already selling its shares. Earlier this year, Buffett announced that the company had closed the Paramount position altogether.

While an exact number hasn’t been disclosed, Buffett himself said at this year’s shareholder meeting that Berkshire had lost a large sum of money on its Paramount shares.

Estimates range as high as $1.5 billion, an amount that would cripple many companies that didn’t enjoy Berkshire’s scale and resources. Although Berkshire can afford such a loss, it’s one of the largest mistakes Buffett has made in recent years.

Kraft-Heinz

Another notable misstep by the Oracle of Omaha was Berkshire’s involvement in the creation of Kraft-Heinz. In 2013, Berkshire acquired Heinz in partnership with a private equity company. Two years later, Buffett was once again at work on the company, this time financing a merger between Heinz and Kraft Foods. The result was a massive stake for Berkshire in the resulting Kraft-Heinz company.

The problem, however, was that Buffett had dramatically overpaid for Kraft as a business. In 2019, Kraft-Heinz wrote down the value of two of its core brands, Kraft and Oscar Meyer.

The market’s reaction sent shares of the company falling by nearly 30 percent. Buffett never chose to dump this position as he did Paramount, but he admitted his folly in paying too much when merging the two companies together.

Alphabet

While we’ll likely never know most of the items that appear on Buffett’s internal record when it comes to investments he didn’t make, one that we do know about is his refusal to invest in Google parent company Alphabet.

Historically, Buffett doesn’t count investments he had no reason to be aware of against himself. In Alphabet’s case, though, Buffett has said that he should have known about the company’s potential because Geico, a Berkshire subsidiary, was paying Google handsomely for advertising when the tech company went public.

For quite some time, Buffett linked his failure to invest in Alphabet to a similar unwillingness to buy Amazon. That mistake, however, was rectified in 2019 when Berkshire acquired over 10 million shares of the eCommerce giant.

While the $2 billion stake Berkshire currently holds in Amazon is a fairly small investment by its standards, the decision to buy demonstrates that Buffett is comfortable revisiting old mistakes to see if they can present new opportunities.

Tesco

Warren Buffett is usually associated with well-known American companies like Coca-Cola and American Express. He has, however, also invested abroad when attractive opportunities present themselves. One case in which that didn’t work out was his investment in British supermarket chain Tesco.

Buffett first bought the stock in 2006 before adding to his position in 2012. By 2013 and 2014, though, Buffett was selling due to a series of management and business problems at Tesco.

Buffett’s mistake in Tesco wasn’t so much buying the company in the first place. After all, Tesco has a massive presence in British grocery retail and performed well for several years after he first invested in it.

Where Buffett fell down, though, was in taking too long to unwind his position. Berkshire began liquidating its shares in 2013 but didn’t finish the job until the next year. By delaying as Tesco’s business standing eroded, Buffett cost Berkshire well over $400 million.

Berkshire Hathaway

Ironically enough, Buffett’s favorite investment is also his self-confessed worst. Berkshire Hathaway, now worth $1 trillion and legendary for its wealth-creating track record, started out as a struggling textile company that was liquidating its mills and buying back shares with the proceeds.

Buffett initially bought stock in the company on the hope that he would turn a profit during the next round of buybacks. When a tender offer for Buffett’s shares was made that was very slightly lower than what he had discussed with the CEO, however, Buffett became angry and began buying shares to take control of the company.

After a series of failed attempts to make the textile business work, Buffett eventually turned Berkshire into the investment powerhouse that it is today.

Before that, though, he broke almost all of his own tried and true investing rules. Not only did he buy Berkshire Hathaway on a rush of emotion after being angered by a low tender offer, but he also purchased a business he knew had poor economics and which likely couldn’t be turned around.

Even though Berkshire worked out extremely well, Buffett’s decision to acquire the company was riddled with flaws that he has personally pointed out many times over the years.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.