Warren Buffett, despite being one of the world’s greatest investors, has had notable investment flops. These mistakes highlight the challenges of investing over a long career and the importance of learning from errors. Five significant investment missteps include IBM (NYSE: IBM), Tesco (NASDAQ: TSCO), ConocoPhillips (NYSE: COP), Dexter’s Shoe Company, and even Berkshire Hathaway (NYSE: BRK-B) itself. However, Buffett’s successes, such as his later investment in Apple (NASDAQ: AAPL), demonstrate that a few great investments can more than compensate for numerous mistakes.

Transcript:

Austin, Warren Buffett is widely considered Earth’s greatest investor, but in a career as long as his, you know, you’ve got some winners and you’ve got some losers.

You just hope the winners are bigger, right? Because as Babe Ruth once famously said, or I guess he lived, he was a home run king and a strikeout king as well.

So you went back through some of Buffett’s most notable investment flops, and I thought it would be kind of fun just to talk about them today.

Yeah. And, you know, hey, let’s be clear. We’re not here to critique Warren Buffett.

He’s a much better investor than us. And we’ve made many, many investing mistakes ourselves.

But this is more about pointing out the challenges, how difficult it is to invest, particularly over a multi-decade career like his and understanding that when you invest for that length of time, you have a lot of stumbles.

So and they’re as important to learn from as our winners.

So let’s look at five times Buffett got it completely wrong.

Number one is IBM. He began investing in IBM in 2011.

He purchased a significant stake over several years. And he talked about the company’s ability to transition into a SaaS-oriented business model, but IBM just struggled.

They had declining revenue. There were probably some cultural challenges there. They were slow to adapt to cloud computing.

Also, we should point out AI is the current megatrend in investing, and IBM in many ways was early on that with Watson, but just hasn’t been able to capitalize.

So this is a company that’s had sort of a history of missed opportunities in their zone of strength. By 2018, Buffett actually sold most of his IBM shares, acknowledging that his thesis hadn’t panned out.

And that’s actually really important. You know, hey, if it doesn’t work out, you got to recognize it. Don’t just hang on to it forever.

Number two, Tesco. In 2006, Berkshire started buying shares in Tesco.

And this is, for those who are unaware, a British multinational grocery chain and merchandise retailer.

So initially, the investment performed well, but the fortunes changed dramatically around 2012.

The company faced accounting scandals, over-expansion issues, increased competition, and Buffett ended up selling his shares at a substantial loss, later calling the investment a huge mistake.

Number three, ConocoPhillips. Buffett’s invested a lot in energy over the years, but he just didn’t get this one right.

So he invested in ConocoPhillips, an oil and gas company, in 2008, just before the price of oil plummeted due to the global financial crisis.

And he admitted that he misjudged the high price of oil and overpaid for shares. So as oil prices fell, so did their share price.

And he later acknowledged that this investment in this mistake cost Berkshire several billion dollars. That’s a big one.

Number four, Dexter’s Shoe Company. This is one of Buffett’s most notorious mistakes.

He acquired Dexter’s Shoe Company in 1993. He made $433 million in Berkshire Hathaway stock. Ouch, because that would be worth a lot today.

And the shoe company quickly became uncompetitive due to cheaper imports. And frankly, the business essentially went to zero.

And Buffett later admitted that this mistake cost billions because the stock that he used for acquisitions would have been worth much more than if he had not spent it on that investment.

Number five, this one might surprise some people, but Berkshire Hathaway itself.

So one of Buffett’s earliest and most significant mistakes was his investment in Berkshire Hathaway.

It was originally a struggling textile manufacturing company, and Buffett began buying shares in the 1960s, initially planning to make a short-term profit by selling them back to the company’s management.

But disagreement with management and then competitive challenges in that sector ultimately just took the investment down to zero.

So despite his best effort, the textile business suffered from eroding economics and competitive pressures leading to substantial losses. But he’s kept the namesake.

Yeah, I mean, it’s as you noted, Austin, it’s the namesake. So it’s surprising for people to see Berkshire Hathaway on that list.

But one thing I want to talk about that IBM by Buffett famously avoided technology.

But as we stated at the beginning, the strikeouts matter less if your slugging percentage is good if you hit those home runs.

And Warren Buffett later changed course, purchased Apple, and it was so successful. It’s now more than 40% of their stock portfolio.

So if you’re an investor out there, just keep that in mind, not getting too hung up on your mistakes because a few great plays can more than make up for it.

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