Warren Buffett has lost at least $ 7 billion from his last 3 major investments
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Many Buffett fans responded by saying that Buffett was not counted yet because when (not so) the market tanks came back, he would have more than $ 130 billion in cash to do good business. My colleague from MarketWatch, Mark Hulbert, noted that the best advisers often return from losing consecutive streaks to make big profits.
So, what did Buffett, almost 90, and his business partner, Charlie Munger, 96, do for us? Berkshire SEC filings show three of Buffett’s biggest recent investments: Kraft Heinz
KHC
, Occidental Petroleum
OXY
and airline stocks lost at least $ 7 billion in total thanks to an investment of around $ 10 billion each.
As far as I know, this is the first time that someone has reported this number. (Berkshire did not respond to my questions via email before the deadline.)
Heinz Debacle
In 2013, Berkshire and the private equity firm 3G Capital paid $ 23.2 billion to buy H.J. Heinz Co.And two years later, Heinz bought the Kraft Foods Group for $ 54 billion. The shares of Kraft Heinz Co. have evolved closely with S&P for a few years. Then, after reaching a closing record above $ 93 in February 2017, it started a long decline.
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Last year, Berkshire marked its investment at $ 3 billion, while Kraft Heinz took a $ 15 billion cancellation in its brands Kraft and Oscar Mayer. In February, even before the market liquidation began, Fitch Ratings and S 8; P Global Ratings downgraded Kraft Heinz’s rating to spam. Meanwhile, in 2018 and 2019, 3G sold millions of shares (still has a large stake) while Berkshire held up. As of March 31, Berkshire Kraft Heinz shares were worth about $ 8 billion, about 2 billion less than what it had paid for them.
When the deal was made, the New York Times called him “A big bet on conventional commodities from the American closet, even when consumers move away from processed foods. “
Millennials are just not among the iconic brands that Buffett enjoyed when she was a child.
“I made a mistake by buying Kraft in terms of overpaying, “Buffett told CNBC last June. Really.
Occidental Petroleum
Two months later, in August, Berkshire made a $ 10 billion investment in Occidental Petroleum, which helped Oxy win a bidding war against oil giant Chevron.
CHV
buy Anadarko Petroleum for $ 38 billion. The agreement made Occidental the best player in the Permian basin. UNITED STATES, The largest oil field in the world.
Berkshire won 100,000 preferred shares, which gives it the first dividend payments in the event of a problem. This is exactly what happened less than six months later. After the recent oil collapse, the West cut dividends on its common stocks by 86%. But it still owes Berkshire a large annual dividend of 8% on the preferred shares, which the West paid in ordinary shares depreciated instead of cash.
Occidental common shares on Wednesday changed hands below $ 15, about a third of the $ 44 per share they traded with at the close of the deal. As of March 31, Berkshire had lost approximately $ 500 million in common shares it held, but the April dividend payment had doubled Berkshire’s common stock holdings, halving its paper loss.
We were unable to determine the current price of Occidental preferred shares, which are not regularly listed. Accumulating these preferred dividends over time, whether in cash or common stock, could soften the blow of an investment which, at best, appears to be a masterpiece of bad weather.
Not one, not two, not three, but four
And then there were the airlines. From mid-2016 to early 2017, Berkshire bought tens of millions of shares in the four largest American airlines: American Airlines Group
AAL
Delta Airlines
DAL
, Southwest Airlines
LUV
and United Airlines
UAL
The price was north of $ 9.3 billion, according to my calculations.
But when the coronavirus arrived, the airline’s shares fell, and by the time Berkshire abandoned them all in April, they were worth around $ 4.3 billion, assuming all of the shares were sold on deposit dates. of the SECOND. This equates to a stratospheric loss of $ 5 billion. If all of these losses are added up, you will have at least $ 7 billion in Berkshire, not to mention any decrease in the value of the Oxy preferred shares you own.
Buffett was unlucky. Who could have planned COVID-19? But the problems with Occidental came soon after the deal was signed, and there have been big clouds over energy supplies for years. Buffett also waited until April to drop the airline’s stock near the bottom.
Even more worryingly, after buying a stake in USAir in 1989, he complained that the investment had “degenerated before the ink dried on the check”.
“Investors have regularly invested money in the activities of national airlines to finance the growth of non-profit organizations,” he wrote to shareholders in 1992.
As recently as 2007, he noted that “a lasting competitive advantage [in the airline industry] has proven difficult to reach since the time of the Wright brothers. “Even in 2013, he called the airlines a” lethal trap for investors. “
So he ignored his own warnings, then went out and bought not one airline, but four? After all these mishaps and losses, who would like to bet a single share of the Berkshire Hathaway shares that Warren Buffett will regain his former glory?