"In the world of business, bad news often surfaces serially: You see a cockroach in your kitchen as the days go by, you meet his relatives."īerkshire eventually sold its remaining interest in the firm and took a $444 million loss. The company's market share fell, its margins contracted and accounting problems surfaced," Buffett wrote. "During 2014, Tesco's problems worsened by the month. The problem was, Tesco was slowly revealing itself to be a not-so-great company. Over the next year, Buffett wrote in his 2014 shareholder letter, he began to "sour" on the firm and sold 114 million shares.īuffett has made his reputation (and billions of dollars) as an investor by buying great companies and holding on over the long term. 'Dawdling' before selling Tescoīy the end of 2012, Berkshire owned 415 million shares of UK grocer Tesco - an investment of $2.3 billion. If you're going to invest in something like, say, a trendy thematic ETF, "you shouldn't be putting in money you couldn't essentially afford to lose." 3. But such a holding "should never be a dominant force in your portfolio," says Kenneth Lamont, senior manager research analyst for passive strategies at Morningstar. That's not to say you can never take a chance on an investment you like. If your bet goes south, you'll not only lose money on your investment, but you'll miss out on the gains you would have enjoyed by sticking to the plan. Diverting a major portion of your assets from your core investments to take a chance on an unknown quantity can be a dangerous move, investing pros say. You may not have stock in your own lucrative company to trade, but you do likely have a core portfolio of low-cost, well-diversified funds. "As a financial disaster, this one deserves a spot in the Guinness Book of World Records," Buffett wrote in his 2014 shareholder letter. Today, the shares would be worth north of $12 billion. "What I had assessed as a durable competitive advantage vanished within a few years," Buffett wrote in his 2007 letter to shareholders.Ĭompounding the mistake, Buffett paid $443 million for the company in Berkshire stock rather than cash. A 'world record' mistake: Buying Dexter Shoeīuffett bought American shoe company Dexter Shoe in 1993, overlooking that the firm was facing heat from foreign manufacturers. In each case, it's important to take a step back and realize that investing is a long-term game, not one that's played in the day-to-day fluctuations of the market.īeing a good investor "is about teaching yourself not to let your emotions become your portfolio's worst enemy," says Sam Stovall, chief investment strategist at CFRA. It's unlikely you'll be in position to buy a company out of spite, but you may find yourself making investing decisions based on emotions, whether it's exuberance over a risky investment you think could make you rich or fear that a falling market could ruin your portfolio. He calculated that the mistake was worth $200 billion. "I had now committed a major amount of money to a terrible business," Buffett later said of the purchase. Instead, he had to spend years and resources trying to revive his textile holding. Had he sold, he may have taken the money and invested in the insurance business - a move that he'd eventually make anyway, and one that would launch is business empire. Instead of selling, he began buying the stock, took control of the company and fired Stanton. But when Buffett received the offer letter from Berkshire, the price had changed to $11 3/8.įeeling chiseled, Buffett sought payback. In 1962 Buffett had built a stake in what was then a failing textiles firm, but agreed to sell his stock back to owner Seabury Stanton at $11.50 per share. During a 2010 appearance on CNBC, Buffett called Berkshire Hathaway "the dumbest stock I ever bought."
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