Warren Buffett stumbles

Warren Buffett's Berkshire Hathaway has been nursing some heavy losses.

Warren Buffett has had a bad few days at the office. Troubled supermarket Tesco has seen its share price fall by almost 50% in the past year, leaving Buffett's Berkshire Hathaway nursing a loss of about $700m. He now says he made a "huge mistake" betting on Tesco.

Then this week, IBM scrapped a long-term growth plan as it reported falling sales and a dip in profits. The shares sank by 7%, wiping another $1bn off Buffett's paper fortune.

To cap it all, another big Buffett investment hit the buffers. Coca-Cola, which he began buying in 1988, warned of a sales shortfall and said currency movements would crimp profits. There went another $990m.

What the commentators said

Even if your investment strategy is generally sound, said Todd Campbell on MotleyFool.com, "you can still end up with a dud". Buffett tries to buy great firms with competitive advantages selling at reasonable prices for the long term.

But what seems to have gone wrong here is that these companies' advantages have been eroded, or even become disadvantages. As Lex put it in the Financial Times, "consumer behaviour is changing".

Just as McDonald's is struggling to make "burgers and fries hip again" as other fast foods gain popularity, Coke's flagship product is struggling with the drift away from sugary drinks. Tesco has too many out-of-town centres at a time when shoppers prefer the web or convenience stores.

IBM is also suffering from structural change, said Richard Waters in the Financial Times. Companies started to pay for access to centralised, online data services run by companies such as Amazon cloud computing rather than buy technology and data services from the likes of IBM to run in their own networks.

Buffett once pledged to avoid tech stocks because he didn't understand them, says Alistair Osborne in The Times. Clearly, "even he can be short on random access memory".

Recommended

Share tips of the week – 28 January
Share tips

Share tips of the week – 28 January

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
28 Jan 2022
Which assets will benefit as the “jam tomorrow” bubble pops?
Investment strategy

Which assets will benefit as the “jam tomorrow” bubble pops?

With tech stocks, cryptocurrencies and many other “long duration” investments crashing hard, the “jam tomorrow” bubble looks to be bursting. John Step…
24 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022
Share tips of the week – 21 January
Share tips

Share tips of the week – 21 January

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
21 Jan 2022

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Amazon halts plans to ban UK Visa credit card payments
Personal finance

Amazon halts plans to ban UK Visa credit card payments

Amazon has said that it is to shelve its proposed ban on UK customers making payments with Visa credit cards.
17 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022