Buffett regrets buying Berkshire
The investor says that he bought the famous company to get revenge -- and that he could have made a wiser choice.
Warren Buffett and Berkshire Hathaway (BRK.A). You can't think of one without the other.
But that's not what Buffett would have preferred. In fact, he told CNBC that Berkshire is the dumbest stock he's ever bought. Buying the company was a $200 billion blunder, he said.
How did Buffett get saddled with one of the biggest mistakes of his life? The story has lessons for any investor -- not just the world's richest. Here's what happened.
Back in 1962, Buffett was running a hedge fund worth about $7 million, he told CNBC. He found a small textile company that was going downhill -- closing mills and buying stock with the proceeds.
He bought the stock and decided to tender it to the company for a small profit, eventually agreeing to a sell price of $11.50 a share. But a few weeks later, the company sent documents showing a sell price of $11.375.
That enraged Buffett, who thought the company was trying to pull a fast one on him. Fueled by revenge, he bought enough shares to control the company and fired the manager who had set the price.
"The truth is I had now committed a major amount of money to a terrible business," he said. "And Berkshire Hathaway became the base for everything pretty much that I've done since."
So Buffett was stuck with a run-down textile company, which he slowly molded into the Berkshire Hathaway that he is known for. But if he had just started out with a regular insurance business, he told CNBC, it would be worth another $200 billion -- twice as much as Berkshire is now.
More from MSN Money:
How investors, small and large, have pass on an investment for another, to have the pass on investment return better than the purchase one? Millions, me included.
What ever the reason for the decision, it is done. We live the moment. If all investors had crystal balls & they shared the information, we would probably never have financial crisis. But reality, investors, big & small, make the decision and the reality follows, good & bad.
The best, even Mr. Buffett, can do, learn from the past and to do a better future. I did after the last real estate crash of 1990 therefore doing better than most.
Hopefully today's investors & people saving for the future have learn something.
I am always amazed how many jerks comment about things they know nothing about. First, JD Wilson is correct, Buffett gave away nearly his entire fortune, not half as has been suggested.
Second, and more important, CNBC is interviewing a different investor every day this week and asking them which investing decision they most regret. This was Buffett's. Tomorrow it is going to be Bill Gross' turn. If you don't get this, why are you on Money Central???
I find that Buffett has always been keenly aware that he was playing with other peoples money - in some cases their entire savings. His annual reports are always insightful, easy to read, and full of mea culpas.
I guess you can learn, or you can continue to be a bitter fool.
He was tendering his shares (selling them back) for $11.50.
Copyright © 2014 Microsoft. All rights reserved.
The stock rises 9% after the company reveals strong second-quarter results.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.