What Warren Buffett learned from his biggest hits—and misses

Warren Buffett will leave behind a peerless record as an investor and acquirer of businesses. And a few real flubs.

He built one of the world’s most valuable companies in Berkshire Hathaway and a following that extended well beyond the shareholders who benefited from Berkshire’s successes. But as Buffett himself has reminded us, not every investment he made in his storied six decades at the helm worked out as well as his bet on Apple. And those mistakes, as Buffett has also said, often offer valuable lessons.

Here are some of Buffett’s greatest hits and misses:

Hit: Coca-Cola

When Buffett first invested in the soft-drink company in 1988, he told Berkshire shareholders he expected to own the stock for a long time. “When we own outstanding businesses with outstanding managements, our favorite holding period is forever,” he wrote in his annual letter to shareholders that year.

True to Buffett’s word, Coca-Cola remains a holding nearly 40 years later. By the end of 2024, the stake was valued at roughly $25 billion. Coke’s dividends, which have increased annually for decades, paid Berkshire some $770 million in 2024 alone.

Along the way, the stock came to represent something more to Berkshire and its shareholders than just a steady source of income. Buffett was Coke’s largest shareholder, a onetime board member and an unflinching pitchman. He often said he drank five Cherry Cokes a day, and his devotion to his favorite soda became part of the lore that drew thousands of fans to Omaha, Neb., for Berkshire’s annual shareholder meetings.

Berkshire’s investment in Coke, along with other corporate giants such as American Express and Apple, also revealed just how Buffett’s investment philosophy had evolved from his earlier days as a cheap-stock connoisseur. It was Charlie Munger, Buffett’s longtime business partner, who had urged him to look instead at higher-quality companies at fair prices.

Miss: Salomon Brothers

Berkshire bought preferred shares in Salomon Brothers in 1987, when it was still one of the biggest firms on Wall Street. In 1991, though, scandal enveloped the investment bank when its traders were accused of rigging a Treasury-note auction. Buffett was forced to step in as chairman to clean up the mess, which ended when the firm settled a spate of government investigations.

Salomon never fully recovered, and in 1997 the firm sold itself to Travelers Group, the financial-services company that would become Citigroup. That deal helped salvage Berkshire’s investment, but the ordeal left its scars. In the decades that followed, Buffett and Munger, once a Salomon board member, would often cite the episode as both a cautionary tale and reason to be wary of Wall Street.

“I can handle bad news but I don’t like to deal with it after it has festered for a while,” Buffett wrote in his 2010 letter to Berkshire shareholders. “A reluctance to face up immediately to bad news is what turned a problem at Salomon from one that could have easily been disposed of into one that almost caused the demise of a firm with 8,000 employees.”

Hit: BYD

Buffett credited Munger for discovering BYD, then a little-known battery maker in China, and encouraging Berkshire to buy a 10% stake in the company in 2008. Within two years, the $230 million investment was valued at nearly $2 billion.

BYD’s shares continued to rise, bolstered by demand for electric vehicles, until 2022. That is when Berkshire began to trim its stake.

Miss: USAir

Berkshire paid $358 million for preferred shares in the U.S. airline in 1989. By the mid-1990s, Buffett had marked down the value of its investment by 75% and issued a mea culpa.

“When Richard Branson, the wealthy owner of Virgin Atlantic Airways, was asked how to become a millionaire, he had a quick answer: ‘There’s really nothing to it. Start as a billionaire and then buy an airline,’ ” Buffett wrote in his 1996 letter to shareholders. “Unwilling to accept Branson’s proposition on faith, your Chairman decided in 1989 to test it by investing $358 million in a 9.25% preferred stock of USAir.”

Buffett conceded he underestimated just how much havoc the deregulation of the U.S. airline industry would play on USAir’s business. From 1990 to 1994, USAir reported total losses of $2.4 billion. (USAir eventually became US Airways, which later merged with American Airlines.)

Buffett says he misjudged how deregulation of the U.S. airline industry would affect USAir’s business.

Hit: MidAmerican Energy

Buffett bought a 75% stake in this Des Moines utility in 1999 at the urging of Walter Scott, a lifelong friend who had joined the Berkshire board in the late 1980s.

MidAmerican, later renamed Berkshire Hathaway Energy, thrived under Berkshire by eschewing dividends and plowing the company’s profit back into the business through acquisitions and capital investments. BHE would become one of Berkshire’s four pillars, along with its insurance and railroad businesses and its stake in Apple. Annual operating earnings grew to nearly $4 billion from $122 million in 2000.

The deal also added Greg Abel to Berkshire Hathaway’s payroll. Buffett now intends to turn over his chief-executive post to Abel at year-end.

Miss: Berkshire Hathaway

In May 1964, the top executive of a struggling textile manufacturer called Berkshire Hathaway wrote to its investors offering to buy their shares for $11.375 a piece. Buffett, a major shareholder, had expected $11.50. But when Berkshire’s Seabury Stanton responded with the lower offer, “I bristled at Stanton’s behavior and didn’t tender,” Buffett wrote in his 2014 letter.

“That was,” Buffett wrote, “a monumentally stupid decision.”

Berkshire continued to wilt along with the rest of the New England textile industry, shutting mills and racking up losses. But Buffett, piqued by Stanton’s actions, ignored the company’s grim outlook and instead kept buying more stock. By May 1965, he took over Berkshire for good. It is a move he still regrets. (Though it did earn him his first mention in The Wall Street Journal.)

“Through Seabury’s and my childish behavior—after all, what was an eighth of a point to either of us?—he lost his job, and I found myself with more than 25% of (Buffett Partnership’s) capital invested in a terrible business about which I knew very little,” Buffett wrote in the 2014 letter. “I became the dog who caught the car.”

Buffett kept the textile business going for years. “But stubbornness—stupidity?—has its limits,” he wrote. “In 1985, I finally threw in the towel and closed the operation.”

Write to Justin Baer at justin.baer@wsj.com