(Reuters) – Warren Buffett also makes mistakes.
The 90-year-old billionaire admitted Saturday that he “paid too much” when his Berkshire Hathaway Inc spent $ 32.1 billion in 2016 to buy aircraft and industrial parts maker Precision Castparts Corp., its biggest buy.
Berkshire wrote $ 9.8 billion worth of Precision in August last year, due to the spread of coronavirus infection by air travel and products to Portland, an Oregon-based unit.
In his annual letter to investors, Buffett said he had bought “a fine company – the best in his business,” and Berkshire was “lucky” that Precision CEO Mark Donegan was still in charge.
But Buffett said he was “just overly optimistic about PCC’s normal profitability.”
Precision will shed more than 13,400 jobs, or 40% of its workforce, in 2020, and they have only recently begun to develop margins, Berkshire said.
“I was wrong … in judging the average future earnings and, as a result, wrong in my calculation of the correct price to pay for the business,” Buffett wrote. “PCC is far from my first such mistake. But it’s big. ”
Two years ago, Buffett admitted that he did “too much” for Kraft Foods when Berkshire and private equity firm 3G Capital merged in 2015 with their HJ Heinz Co. to form Kraft Heinz Co.
And in his 2008 annual letter, Buffett declared his purchase of Dexter Shoe in 1993 the “worst deal ever”, saying he had bought a “worthless business” and augmented his mistake. by using Berkshire stock rather than cash to fund the purchase.
“I’ll make more mistakes in the future – you can bet on that,” he wrote.
Tom Russo, a long-time Berkshire investor, welcomed Buffett’s candlestick.
“I look forward to Warren taking personal responsibility for Precision Castparts,” he said. “Few managers are willing to take responsibility rather than take the blame.”
Reporting by Jonathan Stempel in New York; Edited by Marguerita Choy