Warren Buffett’s 6 Worst Investing Mistakes

With his common sense value investing techniques and his impressive ability to pick the right stocks, Warren Buffett is one of the most successful and interesting investors of our time. However, despite what it might seem like, even the Oracle of Omaha occasionally makes some bad decisions which cost him and his company quite a bit of money.

While Buffett lists the biggest mistake he ever made was as Berkshire Hathaway itself, it is far from the only misstep that the world’s greatest investor has made. Here are six of the worst investing decisions Buffett has made:

6. Salomon Brothers

This financial services firm was known for selling the first mortgage-backed security and was an authority in the financial investment sector. Buffett purchased nearly $700 million worth of stocks during the market crash of 1987, with the thought that Saloman was a strong company that was being undervalued and with a bit of help could be solid again. However, he was dead wrong.

Shortly after his investment, a series of scandals nearly caused the company to bankrupt and Buffett was forced to take over the financial services firm in order to protect his investment. Eventually, he pulled the company out of the gutter and sold it for a profit of $1.7 billion, but he lost plenty of time and money in other areas as he was focused on the failing Salomon Brothers.

5. US Airways

Although Buffett recently took a second shot at the airline business, his time spent with US Airways was easily one of the worst decisions the Oracle of Omaha made. The air travel sector is highly competitive, and shortly after Buffett invested in US Airways, it was outmaneuvered by Southwest Airlines and began to lose money at a rapid pace. Buffett bailed on the company and managed to break even, but the ordeal set him to label airlines a “death trap for investors.”

4. Tesco

Buffett invested in Tesco, a British supermarket retailer, in 2006. He became the company’s third largest shareholder when he purchased 300 million shares for around $1.7 billion. However, a few years later, the company’s stock prices plummeted when the retailer admitted it had overstated its first quarter earnings to the tune of $400 million. Buffett, not one to sell at the first sign of trouble, hung on to the shares and lost around $700 million on the company before selling.

3. Energy Future Holdings

Energy Future Holdings, a Texas electric utility company, had a massive amount of debt (around $2 billion) and Buffett, without input from his partner Charlie Munger, decided to help the company out and purchase the debt as a part of a leveraged buyout of the energy company’s assets. As Berkshire is big into energy, this seems pretty in line with Buffett’s other decisions. However, the deal backfired, and in 2014, Buffett finally sold the bonds for a paltry $259 million—a total loss of $873 million.

2. Dexter Shoe Company

The Dexter Shoe Company debacle is one of many reasons that Buffett no longer uses his stock to purchase companies with any regularity. In 1993, Buffett acquired the company with 1.6% of Berkshire Hathaway’s stock, which was valued at around $433 million at the time. However, the company went under in less than ten years, and closed its doors in 2001. The stocks that Buffett traded went on to be worth around $5 billion, while Dexter Show Company went out of business.

1. Walmart

In 2003, Buffett said that Walmart was one of his worst investments. While the company seemed to be doing well, the returns simply weren’t there. Buffett estimated that his “thumb sucking” in holding on to the company in the hopes it would go up again has cost him around $10 billion. Earlier this year, Buffett finally gave up and began to lessen his stocks in the retailing giant.

 

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