Berkshire Hathaway's Notable Successes and Fails under Warren Buffett's Management
Warren Buffett, the billionaire investor, has announced his plan to step down as CEO of Berkshire Hathaway by the end of the year. At 94, this move might come as a surprise, but this Wall Street legend has left a lasting impact on the investment world.
Starting with his takeover of Berkshire Hathaway in 1965 when it was just a struggling textiles manufacturer, Buffett transformed the company into a powerhouse conglomerate. By finding undervalued businesses and stocks to buy, he grew Berkshire into an investment juggernaut. His success earned him the moniker of the "Oracle of Omaha."
Over the years, Buffett made some fantastic investments that amassed him a fortune. Let's take a look at his best and worst investments:
Buffett's Top Picks
- National Indemnity and National Fire & Marine: Purchased in 1967, this insurance company served as one of Buffett's first significant investments. The insurance float—the premium money insurers can invest between policy sales and claim payouts—became a golden goose, fueling Berkshire's growth over the years. Today, Berkshire's insurance division has grown to include Geico, General Reinsurance, and more, with a float totalling $173 billion.
- Timing the Market: Buffett's knack for buying the right stocks in the right times has proven to be a winning strategy. His investments in American Express, Coca-Cola Co., and Bank of America at the right times are now collectively worth over $100 billion more than what he paid for them, excluding dividends.
- Apple: A latecomer to the tech sector, Buffett started buying Apple shares in 2016. His understanding of Apple as a consumer products company with a loyal customer base paid off. While he later sold off some shares, the value still sits at a whopping $174 billion.
- BYD: In 2008, Buffett invested $232 million in BYD, an electric vehicle maker, on the advice of his late partner, Charlie Munger. The investment soared to more than $9 billion before he began selling off shares, and Berkshire still holds a $1.8 billion stake.
- See's Candy: In 1972, Buffett bought See's Candy, which he claimed to be a turning point in his career. Berkshire has recorded pre-tax earnings of $1.7 billion from the candy company through 2011, and its value continues to increase.
- Berkshire Hathaway Energy: Utilities like Berkshire Hathaway Energy provide a steady stream of profits thanks to the consistent demand for power. Berkshire paid $2.1 billion for Des Moines-based MidAmerican Energy in 2000 and has since made several acquisitions, including PacifiCorp and NV Energy.
Missed Opportunities and Flops
- Berkshire Hathaway: Buffett once called his initial investment in the struggling textile mill a "terrible mistake." Though Berkshire bled money for years, the shares Buffett began buying in 1962 for $7 and $8 a share are now worth over $800,000 each, so even this flop turned out alright.
- Dexter Shoe Co.: A resounding blunder, Buffett bought Dexter in 1993 for $433 million, using Berkshire stock to fund the deal. Buffett later considered it a mistake, as Dexter was worthless in the end.
- Missed Technological Opportunities: Buffett has missed out on some massive tech opportunities, like Google, Microsoft, and Amazon, where he could have made billions if he had invested earlier.
- Selling Banks Too Soon: Buffett sold off his bank stocks, including J.P. Morgan and Wells Fargo, at unfortunate times. Both stocks have since doubled in value, and Buffett had missed out on potential profits.
- Blue Chip Stamps: Buffett's poor investment in Blue Chip Stamps, a customer rewards program, took a nose dive when trading stamps fell out of favor with retailers and consumers. However, he used the float that Blue Chip generated to acquire other profitable businesses, like See's Candy and Wesco Financial.
In conclusion, Warren Buffett's investment strategy combines adherence to value investing principles and an understanding of the companies' fundamentals. His journey into the world of tech has had its share of triumphs and setbacks but has made a lasting impact on Berkshire Hathaway's portfolio.
- Despite periodic setbacks like his initial investment in Berkshire Hathaway being a "terrible mistake," Warren Buffet's success in growing Berkshire Hathaway, starting from a struggling textiles manufacturer in 1965, showcases his ability to identify undervalued businesses and stocks.
- Buffet's early acquisition of National Indemnity and National Fire & Marine in 1967, with an insurance float that became a key element in Berkshire's growth, marked one of his mostsuccessful investments.
- Buffet's investment in Apple in 2016, driven by his understanding of consumer product companies with a loyal customer base, resulted in a significant profit for Berkshire Hathaway, amounting to $174 billion as of today.
- Despite some missed technological opportunities, such as Google, Microsoft, and Amazon, Buffet's investment in BYD, an electric vehicle maker, in 2008, based on the advice of his partner Charlie Munger, yielded a substantial return before selling off shares and Berkshire still retains a considerable stake.
- Aside from his top picks, Buffet has encountered several missed opportunities and flops in his investment career, such as buying the worthless Dexter Shoe Co. in 1993, missing out on tech giants, and selling banks like J.P. Morgan and Wells Fargo at unfavorable times.
