AP Photo/Nati Harnik
- Warren Buffett’s biggest mistake might be dumping Disney — twice.
- The investing guru bought a 5% stake from Walt Disney in 1966, and received a 3.6% stake after Disney bought Capital Cities/ABC — one of Berkshire Hathaway’s key holdings — 30 years later.
- However, Buffett swiftly sold his Disney shares on both occasions, potentially leaving $20 billion on the table.
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Warren Buffett’s biggest mistake might be dumping Disney — twice. The investing guru sold significant stakes in Disney on two occasions, potentially leaving $20 billion on the table.
The so-called Oracle of Omaha met Walt Disney in 1966, when the animator’s company was valued at less than $90 million — about 0.04% of its current market capitalization.
"At Disneyland, the $17 million Pirates of the Caribbean ride would soon open," Buffett wrote in his 1995 letter to shareholders. "Imagine my excitement — a company selling at only five times rides!"
The future Berkshire Hathaway chairman and his partners wasted no time buying a 5% stake in Disney for $4 million. The shares more than doubled in value by 1995. "That decision may appear brilliant," Buffett wrote. "But your chairman was up to the task of nullifying it."
Indeed, Buffett sold the shares a year after buying them, netting a comparatively meager 55% profit. A fact that must sicken the so-called Oracle of Omaha: a 5% stake in Disney would be worth an astounding $12.3 billion today.
Buffett had more bad calls to come. He helped strike a deal for Disney to acquire Capital Cities/ABC, one of Berkshire Hathaway’s biggest investments, in 1995.
The conglomerate netted about $1.4 billion in after-tax cash and a 3.6% stake in Disney from the sale. That holding, which it sold within three years, would have soared more than five-fold in value to $8.9 billion today.
If Buffett and Berkshire Hathaway had held on to their combined 8.6% stake in Disney, it would now be worth more than $21 billion. They would have also received north of $1.5 billion in dividends.
In total, Buffett’s dismal Disney trades mean he may have missed out on a $20 billion return.
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