What Warren Buffett learned from his past investment mistakes, including IBM and airlines

Published Sun, Oct 1 20237:43 AM EDT

Warren Buffett is arguably the most celebrated investor of all time, and one trait that helped land him there is the fact that he's not afraid to admit to mistakes. The 93-year-old value investor has been unloading his HP stake over the past three weeks, leading some to believe he will eventually dump the entire losing bet. The "Oracle of Omaha" might one day explain why he sold the laptop and printer maker, but HP is an example of how his investments in tech haven't all worked out like Apple . That's what Buffett did in in an interview in 2017 by way of explaining an earlier, dud investment he sold in International Business Machines, and his winning bet on Apple. "I was wrong in my original analysis," Buffett said at the time. "I thought that [IBM's] prospects were going to be better in the next five or six years ... so I decided that I had made a mistake... I still don't know that much about the future, but I feel more certain about the future as I look at a company like Apple than when I look at IBM now." In the years after Buffett sold IBM, he dramatically raised Berkshire's stake in Apple, becoming the largest shareholder outside of index and exchange-traded fund providers. As of the end of June, Berkshire's Apple stake was worth more than $177 billion, accounting for nearly half of Berkshire's entire equity portfolio. Buffett previously explained that when Berkshire sells something, it's very often the entire stake as he views equity positions as owning a company's business. "We don't trim positions. That's just not the way we approach it any more than if we buy 100% of a business," he said. Other tech bets In 2018, Buffett bought cloud company Oracle , only to sell the stock within three months. He said he didn't understand exactly where the cloud was going, particularly after his experience with IBM. More recently, the billionaire investor traded in and out of a $4 billion pisition in Taiwan Semiconductor . Buffett said the rapid turnaround was due to political uncertainties. Over the years, the student of Ben Graham has also expressed regret at not buying some of the Big Tech names, even after watching their stock prices explode. He said he "blew it" by failing to invest early in Google even though he had insight into its advertising potential. Berkshire's auto insurance unit Geico was an early customer of Google, paying the search engine 10 bucks every time somebody clicked on the ad at the time. Buffett also admitted it was a mistake not being an early investor in Amazon , saying he underestimated the brilliance of founder Jeff Bezos. "I was too dumb to realize. I did not think [Bezos] could succeed on the scale he has," Buffett said in 2017, adding that he "really underestimated the brilliance of the execution." The investor humbly admitted that he and partner Charlie Munger "miss a lot of things, and we'll keep doing it." Airline woes Another industry that Buffett had regrets about is airlines. In 2016, Berkshire acquired roughly 10% of the four largest airline companies in the U.S. — United , American , Southwest and Delta Air Lines — in a bet north of $4 billion. However, the onset four years later in 2020 of the global pandemic led him to entirely dump the stakes. Some said that Buffett sold them too early and missed the subsequent rebound when the economy reopened. "I just decided that I'd made a mistake in evaluating — it was an understandable mistake," he said during Berkshire's 2020 annual meeting. "It was a probability-weighted decision when we bought that we were getting an attractive amount for our money when investing across the airlines business." The legendary investor has had a bumpy ride with the airline industry. Long before the 2020 sale, Buffett spoke of a soured bet on the old USAir that he first made in 1989. Berkshire put $358 million into USAir in the form of a purchase of preferred stock. Years later, Buffett told shareholders that it was a deal he should not have made. "It could've been worse, but it was a mistake," Buffett said during 1995 annual meeting . Still, he acknowledged that as bad as the US Air investment turned out, at least he'd held the preferred shares. "We're a lot better off, obviously, than if we'd bought the common [stock], " he said then. In the following year's shareholder letter in 1996 , Buffett repeated an old joke about investing in airlines: "When Richard Branson, the wealthy owner of Virgin Atlantic Airways, was asked how to become a millionaire, he had a quick answer: 'There's really nothing to it. Start as a billionaire and then buy an airline.'"