Warren Buffett’s Letter – 1991 (Part 6)
Jan 5th, 2007 by Martin Lee
A Mistake that Warren Buffett Made
Typically, Warren Buffett’s mistakes fall into the omission rather than commission category.
By this, we are not refering to missing out on high tech companies that Warren didn’t buy. He wouldn’t have understood them anyway. Rather, we are refering to business situations that Charlie and Warren can understand and that seem clearly attractive – but in the end they just stood there doing nothing.
Here’s an example:
In early 1988, Warren decided to buy 30 million shares (adjusted for a subsequent split) of Federal National Mortgage Association (Fannie Mae). This would have cost about $350-$400 million.
This was a company that he understood well and was very positive about the company’s future. However after he bought about 7 million shares, the price began to climb. In frustration, he stopped buying. In an even sillier move, he even sold the 7 million shares he owned as he didn’t liked holding small positions.
As of 1991, an estimate of the gain that Berkshire didn’t make – a cool $1.4 billion.
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