Even oracles make mistakes.
Berkshire Hathaway earned $ 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.
The Omaha Oracle said in its annual letter to shareholders that the 2016 purchase of Precision Castparts went wrong, forcing Berkshire to “write down,” or deduct, about $ 11 billion from its bottom line last year.
Buffett labeled the company’s sanitation as “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 firm for $ 32 billion.
“I paid too much for the company,” Buffett, 90, wrote. “No one fooled me in any way; I was just too optimistic about the normalized profit potential of PCC.”
With airlines around the world flying much less over the past year due to the pandemic, the aerospace industry suffered major disruptions, making 2020 a difficult year for the CCP.
“Last year, my miscalculation was exposed by adverse developments in the aerospace industry, the most important source of PCC customers,” Buffett wrote.
Buffett stood firm in the company and said he still believes that over time he will get good returns.
“I was wrong, however, in judging the average amount of future profits, and as a result, I was wrong in my calculation of the right price to pay for the company,” Buffett said. “PCC 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 quoted “A” shares closing Friday at $ 364,580, up 6% from the start of the year. Its “B” shares, which split several years ago to create a more easily negotiable stock, were settled on Friday at $ 240.51, up 7.5% this year.