Warren Buffet’s Blunders: 3 Investments Even the Oracle Regrets

Stock Market

Warren Buffett might be the greatest investor of all time, but he’s not immune from making mistakes. This was on full display at the recent Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) annual meeting, where Buffett disclosed that he had sold the company’s entire stake in Paramount Global (NASDAQ:PARA) at a substantial loss.

Although the exact loss wasn’t disclosed, Buffett said: “I was 100% responsible for the Paramount decision. It was 100% my decision, and we’ve sold it all and we lost quite a bit of money.” The Paramount blunder is the latest bad investment that Buffett has made in the course of a career that spans more than 50 years. What’s nice about Buffett is that he is quick to admit a mistake, correct it, and share what he has learned.

Despite his overall track record of success, Buffett is human like the rest of us and prone to bad decisions when it comes to stocks. Here is Warren Buffet’s blunders: three investments even the Oracle regrets.

IBM (IBM)

Source: shutterstock.com/LCV

Throughout much of his career, Buffett has been criticized for not investing in high-growth technology stocks. He has admitted that his avoidance of the tech sector has cost Berkshire Hathaway and its shareholders some big gains. Buffett still chastises himself for not investing in Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). The Oracle of Omaha has made up some ground in this area by going all in on Apple (NASDAQ:AAPL).

Though he recently trimmed his position in AAPL stock, it remains Berkshire’s biggest position, accounting for 40% of the equity portfolio. However, before he started buying Apple shares in earnest during 2018, Buffett made a costly bet on legacy tech firm IBM (NYSE:IBM). In November 2011, Buffett bought 64 million shares of IBM at an average price of $170, giving Berkshire a $10.7 billion stake in the tech giant.

Seven years later, Buffett sold the entire IBM holding after enduring six years of mounting sales declines and watching as the stock’s price fell to $140 a share. This led to Berkshire incurring a nearly 20% loss on its IBM investment. Fortunately for shareholders of Berkshire Hathaway, Buffett quickly pivoted from IBM to Apple, and the rest is history.

Walt Disney (DIS)

Source: spiderman777 / Shutterstock.com

Paramount Global isn’t the first entertainment stock that Buffett counts as an investment blunder. Early in his career, Buffett made a huge mistake by selling his holding in Walt Disney Co. (NYSE:DIS). Back in 1966, Buffett met with Walt Disney himself, who was then expanding the Disneyland theme park in California. At the time, Disney was known for its one theme park and a couple dozen animated movies. Sentiment towards DIS stock on Wall Street was indifferent.

Buffett apparently liked Walt Disney and the company’s pristine balance sheet. He took a 5% stake in the company, buying $4 million of DIS stock. A year later, Buffett sold his entire stake in Disney for $6 million, netting a 50% ($2 million) profit. The Disney investment may have been profitable, but Buffett earned peanuts compared to what he would have made had he held on. Today, Buffett’s 5% stake in Disney would be worth $10 billion based on the current share price.

Buffett also would have earned more than $1 billion worth of dividend payments over the years had he let DIS stock ride. Maybe this is why Buffett now says his “favorite holding period is forever.”

ConocoPhillips (COP)

The price someone pays for a stock matters. Buying at the top of the market is never a good idea. Yet that is the mistake Buffett made in 2008 when he bought a big stake in oil and natural gas producer ConocoPhillips (NYSE:COP). Buffett bought 79.9 million shares of ConocoPhillips when crude oil prices were trading near $100 a barrel. It turned out to be the peak for energy prices.

Crude oil fell amid the 2008/09 financial crisis and COP stock fell alongside it. As a result, Berkshire Hathaway ended up reporting a $1.5-billion loss for the first-quarter of 2009 as it wrote down its ConocoPhillips investment. At the time, it was the biggest quarterly loss in Berkshire’s history. Buffett called the investment a major mistake and swiftly sold 40% of the ConocoPhillips holding. By 2013, Buffett had completely exited COP stock.

In this case, Buffett appears to have gotten caught up in an energy rally that took place in 2007 and 2008. Buffett has had a love/hate relationship with oil stocks throughout his career, praising their valuations while complaining about the volatility in energy markets.

On the date of publication, Joel Baglole held a long position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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