Warren Buffet calls his 1964 decision to buy Berkshire Hathaway (BRKa)(BRKb) a $200 billion blunder, prompted by a urge to retaliate against the CEO who tried to “chisel” Buffett out of an eighth of a point on a tender deal.
From Buffett: “The dumbest stock I ever bought was, drum roll here, Berkshire Hathaway. And that may require a bit of explanation. It was early in 1962, and I was running a small partnership, about seven million. They call it a hedge fund now. And here was this cheap stock, cheap by working capital standards or so. But it was a stock in a in a textile company that had been going downhill for years. So it was a huge company originally, and they kept closing one mill after another. And every time they would close a mill, they would take the proceeds and they would buy in their stock. And I figured they were gonna close, they only had a few mills left, but that they would close another one. I’d buy the stock. I’d tender it to them and make a small profit.
So I started buying the stock. And in 1964, we had quite a bit of stock. And I went back and visited the management, [B. Hathaway was run by Seabury Stanton at the time] Mr. Stanton. And he looked at me and he said, “Mr. Buffett we have just sold some mills, we got some excess money ; we’re gonna have a tender offer. And at what price will you tender your stock?”
And I said, $11.50. And he said, “do you promise me that you’ll tender it 11.50?” And I said, “Mr. Stanton, you have my word that if you do it here in the near future, that I will sell my stock at 11.50.” I went back to Omaha. And a few weeks later, I opened the mail and here it is: a tender offer from Berkshire Hathaway that’s from 1964 ; and if you look carefully you’ll see the price is 11 and three-eighths. He chiseled me for an eighth. And if that letter had come through with 11 and a half, I would have tendered my stock. But this made me mad. So I went out and started buying the stock, and I bought control of the company, and fired Mr. Stanton.”