Warren Buffett is the living legend of the investment world, and many believe he is the most successful investor in history. The Berkshire Hathaway CEO has created numerous classic success stories in his decades of investment career, but the "God of Omaha" is not a truly omniscient god and has also made a number of mistakes.

However, unlike those executives who always like to cover up and talk about him, Buffett is always able to face his mistakes, give a clear account to shareholders and take full responsibility. More importantly, by studying Buffett's mistakes and listening to his own explanations, investors can learn even more than those success stories.

1. Acquisition of Berkshire

Berkshire is seen as a major starting point for Buffett's career, but it is an open secret that buying the company is one of Buffett's biggest mistakes.

In his 1989 shareholder letter, Buffett wrote: "my first mistake was to acquire a controlling stake in Berkshire." Although I knew at that time that the textile industry was becoming more and more unpromising, I still could not resist the temptation of low prices. Stock acquisitions like this have proved profitable over and over again in my early investment career, but when Berkshire walked into 1965, I began to realize that this strategy was not so ideal. "

In 1962, Berkshire was an ailing textile company with a large number of factories, but company managers had begun to close unprofitable factories. Buffett felt that the market underestimated the value of the company's tangible assets, so he bought a lot of the stock. Two years later, in 1964, the company's then boss, Seabury Stanton, wanted to take back Buffett's minority stake at $11.50 a share. Buffett quickly agreed because he realized that the business was coming to an end. However, when the official letter of offer arrived, the price was reduced to $11.325. Completely infuriated, Buffett refused to sell the shares at a lower price and instead began buying aggressively on the market at a higher price until he was qualified to take control. Buffett fired Stanton when he became the new boss. Buffett finally let out a bad breath, but then he realized that what he got was a bad company bought at too high a premium. In an interview with CNBC in 2010, Buffett himself estimated that he had lost about $200 billion on the deal in 2010 dollars.

The lesson: emotion is not good for investment. For an investor, a sound and logical mindset is indispensable.

two。 Acquisition of Waumbec Textile

Buffett regretted the acquisition of Berkshire, a failing textile company, as early as 1962, but thirteen years later, he did the same thing, buying Waumbec Mills, another New England textile company.

In a 2014 shareholder letter, Buffett recalled: "based on what we know about the value of the assets and the expected synergies with Berkshire's textile business, we think the acquisition price is discounted. "

Buffett later admitted that his decision to buy Waumbec was a terrible mistake, which proved to be true-Berkshire bought the company in 1975, and the plant had to be closed a few years later.

Lesson: you must learn to improve through your own mistakes. If a strategy doesn't make you successful this time, don't repeat it next time.

3. Invest in Tesco

At the end of 2012, Berkshire bought 415 million shares of British grocery store brand Tesco, but in 2014, Buffett had to doubt the conduct of the company's management, which caused the share price to plummet when it was revealed that the company had misstated its profits. Shortly after the investment, Buffett sold about 27% of his shares and made a profit of $43 million, but retained the rest of the shares, missing the final decent exit. In this year's shareholder letter, he honestly wrote: "as a high-profile investor, despite my embarrassment, I have to admit that I should have sold Tesco's shares earlier." My procrastination made a big mistake in the investment. "

As a result, by the time Buffett finally cleared the remaining 73 per cent of his shares, the after-tax loss had reached $444 million.

Lesson: if you don't have strong confidence in a stock you own, don't hesitate, you have to take action. Don't waste time waiting for a better shot. Buffett's old partner Munger simply said that procrastination is a manifestation of "thumb sucking."

4. Acquisition of Dexter Shoe

Looking back on the acquisition of Dexter in 1993, Buffett called it "the worst deal I've ever made."

In the 2007 shareholder letter, Buffett wrote: "in the end, when I said 'yes' to Dexter, I made an even worse mistake. I bought the shoe company with Berkshire stock (25203 A shares) with a bid of $433 million in 1993. At that time, my imaginary long-term competitive advantage vanished in a few years. However, this is just the beginning, because I am using Berkshire stock, which objectively increases the damage. The decision cost Berkshire shareholders more than more than $400m of the purchase price, but $3.5 billion. In essence, I bought a worthless company with a value of 1.6 per cent of a good company, which is currently worth $220 billion. "

At the time, Buffett only saw the company's super-high return on capital, but did not realize that their competitive advantage was not as solid as it seemed. When the pressure of competition from overseas hit, the company quickly went downhill. Buffett had to stop production and merge the rest of the company into another company. Buffett himself estimated that the deal cost the company 3.5 billion dollars.

Lesson: reasonable price and sustainable competitive advantage are the two most basic prerequisites, stay away from corporate stocks that do not have them.

5. Acquisition of Dexter with Berkshire shares

Buffett has not forgotten the failure of Dexter for many years. In his 2014 shareholder letter, he once again mentioned that even if an acquisition had to be made, Berkshire shares should not be used to pay the purchase price of $433 million, but in cash. By the time shareholders started writing, the shares were worth the equivalent of $5.7 billion, he said.

"this deal is enough to enter the Guinness Book of World Records, listed in the category of financial disasters. "

Lesson: ensure the rational allocation of resources. If your current investors are doing well, there is no reason to casually withdraw money from the latter to take risks.

6. Take over Energy Future's debt

Most of the time, Buffett consults with Munger before making an investment decision. But the Energy Future deal was his own idea, and it turned out to be a costly mistake. In his 2013 shareholder letter, he sighed: "most of you probably have never heard the name Energy Future. You guys are so lucky. I wish I hadn't heard it. "

Energy Future is the product of a large leveraged buyout of Texas power utility assets. The company's controlling shareholders at the time had a debt of $8 billion and were constantly borrowing new debt. In accordance with Buffett's own decision, Berkshire bought about $2 billion of the company's debt. In his 2013 shareholder letter, Buffett predicted that unless natural gas prices soared, Energy Future would almost certainly go bankrupt in 2014. This is indeed the case. Fortunately, Buffett got rid of his debt in time, but according to his own estimates, Berkshire still suffered a pre-tax loss of about $873 million.

Lesson: it's good to have your own certainty, but it won't hurt to listen to advice from trustworthy people.

7. Miss Dallas-Fort Worth NBC

It is wrong to make an investment that should not be made, but it is also the same if the investment that should be made is not made. Buffett often regrets not buying Dallas-Fort Worth NBC for $35 million.

In the 2007 shareholder letter, Buffett recalled that he had the opportunity to buy the station in 1972, at about the same time as the acquisition of candy, but missed it. Although he highly trusted the people who recommended the deal and knew that the acquisition had considerable growth potential and essentially did not require capital investment, he ultimately did not agree to invest.

Reflecting on the passing opportunity, Buffett said the station's pre-tax profit in 2006 was $73 million, compared with a valuation of $800m.

Lesson: it's now or never.

8. Issue additional shares for the acquisition of General Reinsurance

Although the acquisition of GM re in 1998 was clearly unsatisfactory at first, fortunately, Buffett finally turned things around, but he still has a lot of regrets.

"although there were some problems in the early days, now General re has become an insurance company that we are proud of. "Buffett wrote in his shareholder letter in 2016," however, it was a terrible mistake for me to issue 272200 Berkshire shares to buy General Reinsurance, which led to a 21.8 per cent surge in the number of shares outstanding. My mistake led Berkshire shareholders to gain far less than they lost. "

Lesson: the best way to enjoy success is to correct your mistakes.

9. Lack of research on general reinsurance acquisition

In fact, investors have too much to sum up from Buffett's acquisition of General Reinsurance.

In his 2001 shareholder letter, Buffett revealed more details about why Berkshire suffered heavy losses on the deal, which revealed that Berkshire had cashed in a loss of $800m on the deal that year. They ignored persistent writedowns, underestimated the likelihood of terrorist attacks, and did not realize that General re did not have enough money to cope with losses on old policies.

Lesson: double-check the important data and ask more trusted consultants to help you with the research. At any time, you must understand what kind of situation you will face under the worst-case scenario.

10. Buy a lot of Conoco shares

In the 2008 shareholder letter, Buffett wrote: "without Charlie or anyone else, I bought a lot of Conoco shares when oil and gas prices were near their peak." I didn't expect the collapse in energy prices in the past six months. "

Buffett initially bought 85 million ConocoPhillips shares for more than $7 billion, but by the time the shareholder letter was released, the shares had fallen to about $4.4 billion.

Lesson: when making major investment decisions, it's always helpful to consult people you can trust. Sometimes, to see the full picture of things, a few different perspectives is the best way.

11. Failed to study Lubrizol in depth

At one point in 2011, Buffett and Berkshire were targeted by the media when David Sokol, then chairman of several subsidiaries, suggested that Buffett buy Lubrizol, in which Soko himself owned shares.

Berkshire eventually bought Lubrizol for about $9 billion, and Soko himself made a direct profit of $3 million from the deal. He did not tell Buffett that he owned shares in the company, in violation of insider trading regulations.

Buffett did not immediately admit his mistake, but at the 2011 shareholder meeting soon after, he told everyone that he should have investigated Soko a little more.

Lesson: don't be overly sure of anyone or anything. When it comes to your wealth and reputation, it's always good to ask more questions.

twelve。 Say no to Amazon.Com Inc stock

It may be an exaggeration to say that this is a "mistake", but Buffett himself thinks so.

When answering questions at the 2016 shareholder meeting, Buffett revealed that he had had the opportunity to buy Amazon.Com Inc's shares, admitting: "I was so stupid that I didn't see the reality clearly." I didn't expect Bezos to be as successful as he is now. When Buffett was asked again why he did not buy Amazon.Com Inc's stock when he visited Squawk Box in February 2017, he admitted: "obviously, I should have bought it a long time ago, because I thought they were great at that time. However, I didn't really understand the power of their model, and at the time, prices always seemed to overestimate the power of the model. As a result, I missed a major opportunity. "

This is Buffett's principle that he never invests in companies he doesn't fully understand, whether the latter is good or bad. Amazon.Com Inc has exceeded his "circle of ability", so Munger does not think this is a mistake, but Buffett stressed that Amazon.Com Inc is not an ordinary technology company, so he should have tried to understand. In any case, even if Buffett invested $100m in Amazon.Com Inc as late as 2008, the investment could now rise to about $4 billion. In an interview with CNBC in May 2019, Buffett revealed that he had finally built a position in Amazon.Com Inc, hoping it would not be too late.

Lesson: you must constantly strive to expand your circle of abilities so that you don't miss out on opportunities that are already readily available.

13. Buy shares of US Airways

Strictly speaking, US Airways's investment is not a typical failure, but Buffett does regret paying $358 million in 1989 for shares in a company that has now disappeared from industry consolidation.

There is no appreciation in these stocks, but according to Forbes, Buffett should have recovered all his principal and a number of dividends after a series of upheavals. Buffett said the airline was able to make a comeback because he and Munger left the board and the arrival of the new chief executive, Stephen Wolf. He said that thanks to Wolf's ability, otherwise the deal might have cost him dearly.

Lesson: carefully study your investors before you start, whether you are a rookie or an old hand, you must know what kind of world you are going to enter.

14. Miss Alphabet Inc-CL C

Buffett had the opportunity to include Alphabet Inc-CL C's stock in his portfolio, which was one of the mistakes he regretted. At Berkshire's shareholder meeting in 2017, he admitted to investors that he had had the opportunity to buy Alphabet Inc-CL C shares for $10 a share through Berkshire's wholly-owned subsidiary Geico many years ago, only to pass by the technology giant.

In the past, Buffett has shunned technology stocks because he doesn't understand the business models of these start-ups. However, he made it clear that he is studying hard and hopes to master it as soon as possible. After all, he is already a client of Alphabet Inc-CL C's advertising business.

Lesson: don't go black just because some investment opportunities are close at hand.

15. Kraft Heinz deal

In 2013, Berkshire and 3G Capital each paid half of the money for Heinz, with Berkshire contributing $4.25 billion. In addition, Berkshire bought $8 billion worth of Heinz preferred stock. Shortly after, in 2015, Berkshire and 3G Capital decided to merge Heinz and Kraft Foods in a stock-and-cash deal, in which Berkshire paid $5 billion in cash dividends to Kraft shareholders. Needless to say, Heinz shareholders, namely Berkshire and 3G Capital, will also face 51 per cent dilution in the deal. In 2019, Kraft Heinz wrote down $15.4 billion, admitting that the price of the Kraft deal was too high. In the end, Berkshire wrote down $3 billion as a result of the series of deals.

The paper loss is only $3 billion, but in Buffett's view, Berkshire's loss is more than that. after all, the merger of Heinz and Kraft also led to equity dilution. In an interview with CNBC in 2019, he admitted frankly: "I made some mistakes in the Kraft Heinz deal." The price we paid to Kraft is too high. "

The lesson: if there is idle money, acquisitions are a viable way to boost returns, but only if the price is reasonable. If you see a company running all sorts of dizzying mergers and acquisitions just to make shareholders look good, it's best to stay away.

16. Overestimate investment in certain manufacturing, service and retail sectors

In his 2015 shareholder letter, Buffett profoundly exposed problems in Berkshire's manufacturing, services and retail sectors, pointing out that some subsidiaries had poor returns, which he saw as a sign of serious mistakes.

"in most cases, my judgment went wrong in assessing the economic dynamics of these companies and industries, and now we are paying the price for my misjudgment. "Buffett wrote," there are also cases in which I made a mistake in assessing the quality and ability of managers. "

Lesson: don't invest rashly. If you are not familiar with the company you are interested in, either seek credible expert advice or give up altogether.