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Warren Buffett’s costly stock mistake

Warren Buffett's costly stock mistake
Elmaz Sabovic

Warren Buffett, the chairman of Berkshire Hathaway (NYSE: BRK.A), is renowned for his impeccable investment record and is regarded as one of the greatest investors of all time. 

However, Berkshire’s performance has lagged behind the S&P 500 Index in recent years, except for 2024, where Berkshire (up 14.33%) performed better than the S&P 500 (up 11.27%). Despite this, the ‘Oracle of Omaha’ maintains a large and loyal following. 

Known for his humility, Buffett has openly admitted to several investment mistakes, one of which involves Kraft Heinz (NASDAQ: KHC), a stock that has consistently underperformed in the S&P 500. 

The Kraft Heinz stock misstep

In a 2019 CNBC interview, Buffett admitted he was wrong about the company, particularly overpaying during the merger with Heinz. 

The same year, Kraft Heinz faced significant challenges, including a $15 billion brand write-down, an SEC investigation into its accounting practices, and a dividend cut. While 3G Capital, Berkshire’s partner in the 2013 Heinz acquisition, has since exited Kraft Heinz, Berkshire continues to hold a 26.8% stake.

When Kraft Heinz began trading as a merged entity in 2015, its stock opened at $71, more than double its current price but less than a third of its 2017 peak.

KHC stock performance since the merger in 2015. Source: Google Finance
KHC stock performance since the merger in 2015. Source: Google Finance

Despite this, Buffett benefits from a substantial dividend from Kraft Heinz, receiving $520.5 million each quarter. This makes Kraft Heinz the highest-yielding dividend stock in his portfolio.

Other notable investment regrets by Warren Buffet

Buffett has admitted to both errors of omission and commission. He regrets not investing early in Amazon (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOG). Although Berkshire has a small stake in Amazon now, it completely missed out on Alphabet. 

The Oracle of Omaha has also admitted that selling Apple (NASDAQ: AAPL) shares was a mistake. Despite this, Berkshire sold billions of dollars worth of Apple shares in Q1, which Buffett indicated was due to tax considerations.

Berkshire Hathaway’s CEO has also acknowledged misjudgments regarding IBM (NYSE: IBM) and the airline industry. He built substantial stakes in four major U.S. airlines, only to sell them at a significant loss in 2020

Moreover, Buffett has admitted to overvaluing Precision Castparts (NYSE: PCP), which Berkshire acquired in 2016, resulting in a nearly $10 billion markdown.

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