(Reuters) – Warren Buffett makes mistakes too.<\/p>\n
The 90-year-old billionaire on Saturday admitted he \u201cpaid too much\u201d when his Berkshire Hathaway Inc spent $32.1 billion in 2016 to buy aircraft and industrial parts maker Precision Castparts Corp, its largest acquisition.<\/p>\n
Berkshire wrote off $9.8 billion of Precision\u2019s value last August, as the coronavirus pandemic sapped demand for air travel and the Portland, Oregon-based unit\u2019s products.<\/p>\n
In his annual letter to investors, Buffett said he bought \u201ca fine company – the best in its business,\u201d and Berkshire was \u201clucky\u201d to have Precision Chief Executive Mark Donegan still in charge.<\/p>\n
But Buffett said he was \u201csimply too optimistic about PCC\u2019s normalized profit potential.\u201d<\/p>\n
Precision shed more than 13,400 jobs, or 40% of its workforce, in 2020, and only recently has begun to improve margins, Berkshire said.<\/p>\n
\u201cI was wrong … in judging the average amount of future earnings and, consequently, wrong in my calculation of the proper price to pay for the business,\u201d Buffett wrote. \u201cPCC is far from my first error of that sort. But it\u2019s a big one.\u201d<\/p>\n
Two years ago, Buffett admitted he \u201coverpaid\u201d for Kraft Foods when Berkshire and private equity firm 3G Capital merged it in 2015 with their H.J. Heinz Co to form Kraft Heinz Co.<\/p>\n
And in his 2008 annual letter, Buffett called his 1993 purchase of Dexter Shoe his \u201cworst deal\u201d ever, saying he had bought a \u201cworthless business\u201d and compounded his error by using Berkshire stock rather than cash to fund the acquisition.<\/p>\n
\u201cI\u2019ll make more mistakes in the future – you can bet on that,\u201d he wrote.<\/p>\n
Tom Russo, a longtime Berkshire investor, welcomed Buffett\u2019s candor.<\/p>\n
\u201cI admire Warren for taking personal responsibility for Precision Castparts,\u201d he said. \u201cFew managers are willing to admit their responsibility rather than pass on blame.\u201d<\/p>\n