Even the world’s most successful investors can get it wrong.
The Daily Telegraph reports that Warren Buffett, the billionaire founder of Berkshire Hathaway, has admitted to an investment that has lost him nearly $900m – after he failed to consult his long-time business partner.
In his annual letter to Berkshire Hathaway shareholders published at the weekend, Buffett said he wished he had 'never heard' of Energy Future Holdings (EHF), a company founded seven years ago to buy Texas electricity utilities. It now appears to face certain bankruptcy.
Buffett said he had spent $2bn buying EHF debt without asking for the opinion of his long-serving collaborator Charlie Munger, which he now admitted had been a 'big mistake'.
'Unless natural gas prices soar, EHF will almost certainly file for bankruptcy in 2014. Last year, we sold our holdings for $259m. While owning the bonds, we received $837m in cash interest. Overall, therefore, we suffered a pre-tax loss of $873m. Next time I’ll call Charlie', wrote Buffett.
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