Even oracles make mistakes.

Berkshire Hathaway earned $42.5 billion in 2020, but on Saturday, CEO Warren Buffett admitted the conglomerate’s results for the year included a rare “mistake” — that cost the company $11 billion.

The Oracle of Omaha said in his annual letter to shareholders that his 2016 purchase of the company Precision Castparts went bad, forcing Berkshire to “write down,” or deduct, nearly $11 billion from its bottom line last year.

Buffett labeled the write-down on the company, “ugly.” And he blamed himself, saying it was “almost entirely the quantification of a mistake I made in 2016.”

Berkshire, based in Omaha, Nebraska, bought the aerospace manufacturing firm for $32 billion.

“I paid too much for the company,” Buffett, 90, wrote. “No one misled me in any way – I was simply too optimistic about PCC’s normalized profit potential.”

Berkshire Hathaway Chairman and CEO Warren Buffett, center, looks at products produced by Precision Castparts.
Berkshire Hathaway Chairman and CEO Warren Buffett, center, looks at products produced by Precision Castparts.
AP Photo/Charlie Riedel

With airlines worldwide flying far less over the last year due to the pandemic, the aerospace industry suffered from major disruption, making 2020 a rough year for PCC.

“Last year, my miscalculation was laid bare by adverse developments throughout the aerospace industry, PCC’s most important source of customers,” Buffett wrote.

Buffett stood his ground on the company and said he still believes over time it will earn good returns.

Attendees pass the Precision Castparts Corp. booth during the Berkshire Hathaway Inc. annual shareholders meeting in Omaha, Nebraska, U.S., on Saturday, April 30, 2016.
Attendees pass the Precision Castparts Corp. booth during the Berkshire Hathaway Inc. annual shareholders meeting in Omaha, Nebraska on April 30, 2016.
Bloomberg via Getty Images

“I was wrong, however, in judging the average amount of future earnings and, consequently, wrong in my calculation of the proper price to pay for the business,” Buffett said. “PCC is far from my first error of that sort. But it’s a big one.”

Berkshire Hathaway remains the most expensive stock on the market, with its lightly traded “A” shares closing Friday at $364,580, up about 6 percent since the start of the year. Its “B” shares, which were split off several years ago to create a more easily traded stock, settled Friday at $240.51, up about 7.5 percent this year.



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