I don’t mean to imply with that headline that we need any reminder of Buffett’s generosity to his fellow man — his massive gift to the Gates Foundation tells us all we need to know about his compassion. No, I mean this to be a reminder that he is human, and does make mistakes.
Warren Buffett hates to sell investments. He rarely does so, and it usually is a big deal when he does. He famously regrets his investment in USAir many years ago, as almost everyone ends up regretting investments in US Airlines, and had those regrets even before $100 oil (I’m personally being punished for my investment in a Brazilian airline, GOL, though I’m stubbornly sticking with it so far).
And he publicly shared his regrets about not selling off some of Berkshire’s large position in Coca Cola when it got to the $80s during the bubble years (can you believe that’s now ten years ago?), though KO has certainly not fallen as badly as some, and has finally returned to a bit of a growth trend in the last couple years.
And clearly, Buffett has made some brilliant calls over the past year or so, including his huge investment in railroads — that was prescient, wise, and has so far been very profitable. But as clearly, he misjudges companies and markets sometimes.
The reason for noting this today is that Barron’s this weekend ran a little update on USG (sub required for full article). Remember them? They’re the maker of sheetrock wallboard, a product that is continuing to experience a double whammy of negatives (I guess this is the opposite of the “perfect storm” of positives that we often hear referenced in the investing press): the product is energy intensive, both to produce and transport (if you’ve done any drywalling, you know how heavy it is, and its manufacture requires copious amounts of natural gas); and it’s also, not surprisingly, used primarily in residential and commercial construction — areas that I think we can all agree are less than promising at the moment, and have been for a couple years.
But Buffett continued buying USG, tempted by the low valuation and the extremely strong market position of their product and brand — maybe other things compelled him, too, like the fact that there’s no import competition, or that it’s a simple and understandable business that ...