(Reuters) – Warren Buffett is also making mistakes.
The 90-year-old billionaire admitted on Saturday that he “paid too much” when Berkshire Hathaway Inc spent $ 32.1 billion in 2016 to buy aircraft and industrial parts manufacturer Precision Castparts Corp., the largest acquisition of to.
Berkshire canceled its $ 9.8 billion Precision value in August last year as the coronavirus pandemic reduced demand for air travel and unit products from Portland, Oregon.
In his annual letter to investors, Buffett said he bought “an excellent company – the best in his business”, and Berkshire was “lucky” to still have chief executive Mark Donegan.
But Buffett said he was “simply too optimistic about the CCP’s normalized profit potential.”
Accuracy has eliminated more than 13,400 jobs, or 40% of the workforce, by 2020 and has only recently begun to improve margins, Berkshire said.
“I was wrong … 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 wrote. “The CCP is far from my first mistake of this kind. But it’s big. ”
Two years ago, Buffett admitted that he “overpaid” for Kraft Foods when Berkshire and private equity firm 3G Capital merged it in 2015 with HJ Heinz Co to form Kraft Heinz Co.
And in his 2008 annual letter, Buffett called the 1993 acquisition of Dexter Shoe “the worst deal ever,” saying he bought a “worthless deal” and aggravated his mistake by using Berkshire shares rather than cash to finance the acquisition.
“I will make more mistakes in the future – you can bet on that,” he wrote.
Tom Russo, a longtime investor in Berkshire, hailed Buffett’s sincerity.
“I admire Warren for taking personal responsibility for Precision Castparts,” he said. “Few managers are willing to admit responsibility rather than blame.”
Jonathan Stempel’s report to New York; Montages of Marguerita Choy