4 Stupid Investment Decisions of Warren Buffett that He Regrets

These decisions cost him over 10 billion dollars.

Incurring loss in investment is one facet of it. The other being the trigger of the investment — earning money.

But you can’t avoid financial losses in a business. Because human errs and sometimes even the biggest investors make investment mistakes that cost them billions of dollars.

However, they learn from their mistakes and rise with more power.

Their reemergence emanates from their willpower that never let them stay down but push them more upward to reach the skies of excellence and success.

That’s the difference in attitude between a loser and a winner. That’s why we have both — winners and losers.

One such winner is Warren Buffett and who doesn’t know him — the CEO of the biggest company Berkshire Hathaway, nicknamed as the “Oracle of Omaha”. The world knows him to be the most successful investor and a prominent business magnet of all time.

However, this doesn’t mean he doesn’t make investment mistakes. Actually, he does and has done many in the past that cost his wallet beyond your imagination.

Buffett shares his insight learned from the biggest investment mistake in the annual letters to his Berkshire Hathaway shareholders. Those letters revealed how he misjudged certain business deals that later on proved to the pain in his neck.

However, those letters provide important insights to the business community as to how to be on the safe side while doing investment.

So, here are the biggest of Warren Buffett’s investment mistakes that he made over the course of his business life.

1. Buying ConocoPhillips Stock

Warren Buffett bought an enormous amount of ConocoPhillips stock that turned out to be his biggest investment mistake.

He concluded the deal on $7 billion and thinking it would bring him huge economic dividends, but he failed to analyze that the prices of oil and gas were at the highest level at that time.

One barrel of oil cost over $100 and at the time of writing this letter to his shareholders, the market value of the stock stood at $4.4 billion.

What he thought to be a substantial investment for the playing on future energy prices turned out to be a poor deal. He explains this in one of his letters to his shareholders:

“Without urging from Charlie or anyone else, I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year.”

His mistake was not consulting with his people before making such a huge investment deal. His letter hints at the idea of consultation with experts before jumping into such a big deal.

If you plan to invest in something, you should consult others who have the know-how of the market.

2. Buying Dexter Shoes CO by Using Berkshire Stock

In a letter to his shareholders, Warren Buffett expressed his regrets over how he made a mistake by buying Dexter Shoe Co, a shoe company, with $433 million as a purchase deal.

Instead of giving cash to the seller, he funded the deal from the Berkshire shares that turned out to be the biggest mistake. He said in his letter that the deal cost him $3.5 billion.

Buffett himself claimed it was his worst investment fail and said:

“As a financial disaster, this one deserves a spot in the Guinness Book of World Records.”

“To date, Dexter is the worst deal that I’ve made. But I’ll make more mistakes in the future — you can bet on that.”

He bought the company because he thought it would give him a long-lasting competitive advantage, but that quality of the company quickly vanished. He himself said:

“What I had assessed as a durable competitive advantage vanished within a few years.”

Buffett played a wild game and was led by his urges to close the deal quickly. However, the lesson you can learn from this mistake is to make such a deal when you have cash for the deal and the backup plan.

At least, you shouldn’t be pulling out shares from already established businesses. If it fails to return the dividends, your entire business may fall flat.

3. Passing up the Dallas-Fort Worth NBC Station Purchase

Sometimes missing a golden opportunity can also cost you a lot and you regret that decision later on. This is what happened to Buffett in 1972 when he passed up the opportunity to buy the Dallas-Fort Worth NBC station for $35 million.

He regretted the decision in his letters to shareholders that he declined the offer because he bought See’s Candies in those days. However, he knew that the station has the potentials to grow with little capital investment, and the person who made the offer was also trusted, still, he missed it.

In his letter, he said that in 2006; the station gained $73 million pre-tax, and in 2007, its value surpassed $800 million.

So, we not only learn from his financial losses but also from those opportunities that he denied. It hints you to never let the opportunity go waste when you know the person who is making the offer is trustworthy and the deal can bring financial dividends.

4. Not Investing in Google on Time

Warren Buffett also missed the chance to invest in the tech giant — Google. He regrets that his business portfolio doesn’t include Google stock. He expressed his mistake to his shareholders in the annual meeting of Berkshire Hathaway in 2017 that it was his biggest mistake not to buy shares in Google when Geico — a Berkshire-owned subsidiary — offered it $10 per click.

The reason he explained for not opting to purchase shares in Google is that he didn’t understand how it works at first. He thought he should have learned about it and should not have lost the biggest opportunity under his nose.

A similar mistake he made by not opting to invest in Amazon. In his interview with “Squawk Box” in 2017, he replied to a question as to why he’d not purchased stock in Amazon? He simply said:

“Obviously, I should have bought it long ago, because I admired it long ago. But I didn’t understand the power of the model as I went along. And the price always seemed to more than reflect the power of the model at that time. So, it’s one I missed big time.”

What did you learn from his mistake? Do you think it’s a wise decision not to invest in things you don’t understand?

To some extent, yes, but ignorance is no excuse. One should learn about emerging businesses and invest on time.

Wrapping it up

Dividends and losses are part of businesses. We can’t avoid losses. They have to come and come for good — not good only — bad sometimes.

And these financial losses often stem from our carelessness, taking decisions driven by emotions, or not consulting the experts. We often make the biggest mistakes by ignoring the potential deals that later on become our biggest regrets.

But these losses and regrets are not bad. They are good and we learn a lot from them. Warren Buffett learned from them as he expressed it in his letters to his shareholders. But we also learn from those experiences.

And the biggest business insights these mistakes provide are that one should consult others before jumping into a business deal.

Also, one shouldn’t leave the potential opportunities as they don’t knock on the door always, but if you are not familiar with something, you shouldn’t avoid such deals but get expert advice or services to conclude the deal.