Why Warren Buffett called Berkshire Hathaway his 'dumbest' investment
What's the story
Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, has referred to his own company as "the dumbest stock I ever bought." The statement was made during an interview with CNBC's Becky Quick. Buffett's comment stemmed from his initial investment in Berkshire Hathaway in 1962 and subsequent takeover of the struggling textile company in 1965.
Investment approach
Buffett's initial investment strategy and subsequent decision
Buffett's initial strategy for investing in Berkshire Hathaway was to buy the stock at a low price, then sell it back to the company through a tender offer for a small profit. However, when the firm's management offered him a lower price than promised in 1964, he was angered and decided to buy more stocks and take control of the company. This emotional decision led him into owning a declining textile business with no visible future growth.
Business challenges
Struggle with Berkshire's textile operations
Buffett struggled for nearly 20 years to fix the textile business, which dragged down Berkshire's overall performance. He later realized that if he had used the same money to build an insurance company instead of investing in a failing business, Berkshire Hathaway would have been worth far more today. This realization highlighted his mistake was not buying Berkshire itself, but staying invested in a poor business for too long.
Strategy
Buffett's investment philosophy
Buffett is known for his long-term value investing, which focuses on high-quality businesses. His investment philosophy revolves around buying great firms at fair prices rather than just cheap stocks. He believes investors should buy stocks with strong fundamentals and management quality, and invest only in businesses they completely understand. This approach has made him one of the most successful investors in history.