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Warren Buffett blames $ 11 billion loss for “mistake”



Even oracles make mistakes.

Berkshire Hathaway earned $ 42.5 billion in 2020, but CEO Warren Buffett admitted on Saturday 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 purchase of Precision Castparts failed, forcing Berkshire to “record” or deduct nearly $ 11 billion from its final result last year.

Buffett called the company’s write-off “ugly.” And he blamed himself, saying it was “almost entirely quantifying a mistake I made in 2016.”

Berkshire, based in Omaha, Nebraska, bought the aerospace manufacturing company for $ 32 billion.

“I paid too much for the company,”

; Buffett, 90, wrote. “No one let me down in any way – I was just too optimistic about the normalized profit potential of the PCC.”

Berkshire Hathaway Chairman and CEO Warren Buffett, at the center, examines products manufactured by Precision Castparts.
Berkshire Hathaway Chairman and CEO Warren Buffett, at the center, examines products manufactured by Precision Castparts.
AP Photo / Charlie Riedel

As airlines worldwide have flown much less in the past year due to the pandemic, the aerospace industry is suffering from major disruptions, making 2020 a rough year for the PCC.

“Last year, my mistake was exposed to the unfavorable development of the aerospace industry, the most important source of PCC customers,” Buffett wrote.

Buffett took the company’s position and said he still believed that over time it would gain a good return.

Participants walk through the booth of Precision Castparts Corp.  during the annual shareholders' meeting of Berkshire Hathaway Inc.  in Omaha, Nebraska, USA, on Saturday, April 30, 2016
Participants walk through the booth of Precision Castparts Corp. during the annual meeting of shareholders of Berkshire Hathaway Inc. in Omaha, Nebraska on April 30, 2016.
Bloomberg via Getty Images

“However, I was wrong in estimating the average amount of future profits and, therefore, I am wrong in calculating the appropriate price to pay for the business,” 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 poorly traded A shares closing at $ 364,580 on Friday, up about 6% from the beginning of the year. His B shares, which were split a few years ago to create an easier-to-trade stock, settled at $ 240.51 on Friday, up about 7.5 percent this year.


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