Warren Buffett’s strategies for Berkshire Hathaway haven’t gone well as late, with the company taking a $25 billion loss in the last quarter of 2018. And, according to a new interview on Monday, one of the bigger mistakes had to do with Kraft Heinz.
“I was wrong in a couple of ways about Kraft Heinz,” Buffett told CNBC. “We overpaid for Kraft.”
Kraft Heinz did a $15.4 billion writedown of its acquisitions of Kraft and Oscar Mayer. That caused Berkshire Hathaway to in turn write down $3 billion, according to the Globe and Mail.
Kraft has $7 billion in tangible assets—things like machinery, land, inventory, stocks, bonds, and cash—and earned $6 billion before taxes on them. However, Berkshire Hathaway “paid $100 billion in tangible assets” when it and 3G Capital first bought H.J. Heinz in 2013 and then funded the Heinz acquisition of Kraft Food.
But once bitten doesn’t mean twice shy. Buffett has been on the hunt for another big deal to put some of its large cash reserves to use and was close to an acquisition in the fourth quarter of 2018, he told CNBC. He refused to offer any other details.
Finding another prospect will be a challenge Buffett said in Berkshire Hathaway’s latest letter to shareholders. ” Prices are sky-high for businesses possessing decent long-term prospects,” he wrote.
