Even oracles make mistakes.
Berkshire Hathaway earned $ 42.5 billion in 2020, but on Saturday, CEO Warren Buffett acknowledged 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 2016 acquisition of Precision Castparts went wrong, forcing Berkshire to “write” or deduct nearly $ 11 billion from last year’s bottom line.
Buffett called the company’s discount “ugly.” And he blamed himself, saying it was “almost entirely a quantification of a mistake I made in 2016.”
Berkshire, based in Omaha, Nebraska, bought the aerospace company for $ 32 billion.
“I paid too much for the company,” wrote Buffett, 90. “No one misled me – I was just too optimistic about the CCP’s normal profit potential.”
Given that airlines around the world have been flying much less in the last year due to the pandemic, the aerospace industry has suffered major disruptions, making 2020 a tough year for the CCP.
“Last year, my miscalculation was revealed by adverse developments in the aerospace industry, the CCP’s most important source of customers,” Buffett wrote.
Buffett remained firm in the company and said he still believes he will make good profits over time.
“However, I was wrong in judging the average amount of future earnings and, as a result, I was wrong in calculating the right price to pay for the business,” Buffett said. “The CCP is far from my first mistake of this kind. But it’s big. ”
Berkshire Hathaway remains the most expensive stock on the market, with its slightly traded “A” shares closing at $ 364,580 on Friday, up about 6% from the beginning of the year. Its “B” shares, which were split a few years ago to create a more easily traded stock, stood at $ 240.51 on Friday, up about 7.5 percent this year.