Anorak News | Not So Clever Warren Buffett Has Lost $750 Million On Tesco Shares

Not So Clever Warren Buffett Has Lost $750 Million On Tesco Shares

by | 25th, September 2014

Ouch, this has got to hurt. Yes, I know that Warren Buffett’s Berkshire Hathaway is a vast company, that a loss like this won’t in fact make all that much difference to the future, but it’s still gotta hurt:

Since last June, his shares in Tesco have lost almost $750 million in value after the shares plunged by as much as 43% this year. It paid $1.7 billion for the stake.

The problem is that Buffett thought that Tesco was a solid and well managed business. So, when it issued a profits warning he thought that would be something of a blip: management would sort things out and the shares would go back up again.

That’s not quite how things worked out: in trying to sort things out the management seems to have made things very much worse. By playing with the accounts to make it look like they were making very much more money than they actually were.

And thus the stock has tanked in this past week. And so Buffett is out that $750 million.

When others were ditching the stock, Buffet was buying.

Mr Buffett has made his fortune taking brave, long-term decisions with his famous quote: ‘Be fearful when others are greedy and greedy when others are fearful.’

Yep, it often works but this time it simply didn’t. Because the problems at Tesco were rather more deep rooted than anyone knew. Except, perhaps, the management, and they were desperately trying to paper over the cracks rather than tell anyone.

Posted: 25th, September 2014 | In: Money Comment | TrackBack | Permalink