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Warren Buffett’s Biggest Wins & Fails

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Warren Buffett’s investing track record is nearly impeccable.

Over his lifetime, Buffett has built Berkshire Hathaway into one of the biggest companies in American history, amassed a personal fortune of over $80 billion, and earned acclaim as one of the world’s foremost philanthropists.

But in a 75-year career, it’s no surprise that even Buffett has made the odd blunder – and there’s one that he claims has ultimately costed him an estimated $200 billion!

The Warren Buffett Series

Part 4: Buffett’s Biggest Wins and Fails

Today’s infographic highlights Buffett’s investing strokes of genius, as well as a few decisions he would take back.

It’s the fourth part of the Warren Buffett Series, which we’ve done in partnership with finder.com, a personal finance site that helps people make better decisions – whether they want to dabble in cryptocurrencies or become the next famous value investor.

The Warren Buffet Series: The Early YearsInside Warren Buffett's BrainPart 3Warren Buffett's Biggest Wins and FailsBest Buffett Quotes

Warren Buffett's Biggest Wins and Fails
Note: New series parts will be released intermittently. Stay tuned for future parts with our free mailing list.

How did Buffett go from local paperboy to the world’s most iconic investor?

Here are the backstories behind five of Warren’s biggest acts of genius. These are the events and decisions that would propel his name into investing folklore for centuries to come.

Buffett’s 5 Biggest Wins

From making shrewd value investing calls to taking advantage of misfortune in the salad oil market, here are some of the stories that are Buffett classics:

1. GEICO (1951)
At 20 years old, Buffett was attending Columbia Business School, and was a student of Benjamin Graham’s.

When young Buffett learned that Graham was on the board of the Government Employees Insurance Company (GEICO), he immediately took a train to Washington, D.C. to visit the company’s headquarters.

On a Saturday, Buffett banged on the door of the building until a janitor let him in, and Buffett met Lorimer Davidson – the future CEO of GEICO. Ultimately, Davidson spent four hours talking to this “highly unusual young man”.

He answered my questions, taught me the insurance business and explained to me the competitive advantage that GEICO had. That afternoon changed my life.

– Warren Buffett

By Monday, Buffett was “more excited about GEICO than any other stock in [his] life” and started buying it on the open market. He put 65% of his small fortune of $20,000 into GEICO, and the money he earned from the deal would provide a solid foundation for Buffett’s future fortune.

Although Buffett sold GEICO after locking in solid gains, the stock would rise as much as 100x over time. Buffett bought his favorite stock again a few years later, loaded up further during the 1970s, and eventually bought the whole company in the 1990s.

2. Sanborn Maps (1960)
This early deal may not be Buffett’s biggest – but it’s the clearest case of Benjamin Graham’s influence on his style.

Sanborn Maps had a lucrative business around making city maps for insurers, but eventually its mapping business started dying – and the falling stock price reflected this trend.

Buffett, after diving deep into the company’s financials, realized that Sanborn had a large investment portfolio that was built up over the company’s stronger years. Sanborn’s stock was worth $45 per share, but the value of the company’s investments tallied to $65 per share.

In other words, these investments held by the company were alone worth more than the stock – and that didn’t include the actual value of the map business itself!

Buffett accumulated the stock in 1958 and 1959, eventually putting 35% of his partnership assets in it. Then, he became a director, and convinced other shareholders to use the investment portfolio to buy out stockholders. He walked away with a 50% profit.

3. The Salad Oil Swindle (1963)
For a value investor like Buffett, every mishap is a potential opportunity.

And in 1963, a con artist named Anthony “Tino” De Angelis inadvertently set Buffett up for a massive home run. After De Angelis attempted to corner the soybean oil market using false inventories and loans, the market subsequently collapsed.

American Express – the world’s largest credit card company at the time – got caught up in the disaster, and its stock price halved as investors thought the company would fail.

Although everyone else panicked, Buffett knew the scandal wouldn’t affect the overall value of the business. He was right – and bought 5% of American Express for $20 million. By 1973, Buffett’s investment increased ten times in value.

4. Capital Cities / ABC (1985)
In the 1980s, corporate raiders and takeover madness reigned supreme.

The massive TV network ABC found itself vulnerable, and sold itself to a company that promised to keep its legacy intact. Capital Cities, a relative unknown and a fraction of the size, had somehow managed to buy ABC.

The CEO of Cap Cities, Tom Murphy – one of Buffett’s favorite managers in the world – gave Warren a call:

Pal, you’re not going to believe this. I’ve just bought ABC. You’ve got to come and tell me how I’m going to pay for it.

– Tom Murphy, Capital Cities CEO

Berkshire dropped $500 million to finance the deal. This turned Buffett into Murphy’s much-needed “900-lb gorilla” – a loyal shareholder that would hold onto shares regardless of price, as Murphy figured out how to turn the company around.

It turned out to be a fantastic gamble for Buffett, as Capital Cities/ABC sold to Disney for $19 billion in 1995.

5. Freddie Mac (1988)
Buffett started loading up on shares of Freddie Mac in 1988 for $4 per share.

By 2000, Buffett noticed the company was taking unnecessary risks to deliver double-digit growth. This risk, and its short-term focus, turned Buffett off the company. As a result, at a share price close to $70, he sold virtually all of his holdings, enjoying a return of more than 1,500%.

I figure if you see just one cockroach, there’s probably a lot.

– Warren Buffett

Later on, Freddie Mac’s business would collapse in the housing crisis, only to be taken over by the U.S. federal government. Today, its stock sells for a mere $1.50 per share.

Buffett’s Blunders

Over the course of 75 years, it’s not surprising that even Buffett has made some serious mistakes. Here are his costliest ones:

1. Berkshire Hathaway (1962)
When Buffett first invested in Berkshire Hathaway, it was a fledgling textile company.

Buffett eventually tried to pull out, but the company changed the terms of the deal at the last minute. Buffett was spiteful, and loaded up with enough stock to fire the CEO that deceived him.

The textiles business was terrible and sucked up capital – and Berkshire unintentionally would become Buffett’s holding company for other deals. This mistake, he estimates, costed him an estimated $200 billion.

2. Dexter Shoes (1993)
Dexter Shoe Co. had a long, profitable history, an enduring franchise, and suberb management. In other words, it was the exact kind of company Buffett liked.

Buffett dropped $433 million in 1993 to buy the company, but the company’s competitive advantage soon waned. To make matters worse, Warren Buffett financed the deal with Berkshire’s own stock, compounding the mistake hugely. It ended up costing the company $3.5 billion.

To date, Dexter is the worst deal that I’ve made. But I’ll make more mistakes in the future – you can bet on that.

– Warren Buffett

Later on, Buffett would say that this deal deserved a spot in the Guinness Book of World Records as a top financial disaster.

3. Amazon.com (2000s)
Buffett says not buying Amazon was one of his biggest mistakes.

I did not think [founder Jeff Bezos] could succeed on the scale he has. [I] underestimated the brilliance of the execution.

– Warren Buffett

Given that Amazon has shot up in value to become one of the most valuable companies in the world, and that Jeff Bezos is by now the far richest person globally, it’s fair to say this whiff continues to haunt Buffett to this day.

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Green

New Waves: The ESG Megatrend Meets Green Bonds

With ESG investing outperforming benchmarks, could green bonds be next in line? We unpack the megatrend taking hold of the financial world.

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New Waves: The ESG Megatrend Meets Green Bonds

It’s clear that sustainable investing has been thrown into the limelight.

Increasingly, investors are seeing both the financial and social imperative for sustainable investing. In particular, the rapid growth of green bonds—a fixed income investment that is designed to raise funds for the climate or environment—is booming.

The above infographic from Raconteur navigates the growing green bond market against the backdrop of the broader ESG (environmental, social, and governance) investing shift.

Gathering Steam

By the end of 2020, $45 trillion in assets will adhere to sustainable practices, including ESG principles.

Despite the loss of confidence from COVID-19, investors flocked to sustainable-focused funds.In fact, global fund flows hit record levels for Q2 of 2020—surpassing $71 billion.

The fund flows are not without financial warrant. Between April 2015 and April 2019, average returns of socially responsible investments (SRI) outperformed their non-SRI peers. At the same time, 94% of sustainable indices realized stronger returns than their benchmarks between January and March 2020.

The accelerating demand for sustainable investments may seem like old news, but green bonds offer a new avenue.

What Are Green Bonds?

Green bonds raise money for climate and environmental projects, and are issued by governments, corporations, and financial institutions.

Multilateral development banks, which include the European Investment Bank and the World Bank, initially brought them to market in 2007, though they had a slow start. However, in 2019, new issues of green bonds topped $258 billion worldwide—jumping 51% in one year.

Across the green bond market there is a broad spectrum of different debt instruments. These include private placements, covered bonds, and green loans.

Green private placements occur when the sale of bonds are made to private investors, rather than through public offerings. Green covered bonds, on the other hand, are bonds that are backed by a group of assets that are sustainably-focused. Green loans are forms of loans that are meant to finance green projects.

Overall, green bonds can be diversified across a number of different sectors.

The Top Purposes for Green Bonds

What are the top sectors for green bond issuance?

Category20152019
Alternative energy$30.4B$143.8B
Green building$10.7B$63.5B
Sustainable transport$3.7B$58.7B
Energy efficiency$9.5B$47.6B
Sustainable water$3.1B$23.8B
Pollution prevention$1.4B$18.1B
Climate adaptation$1.8B$15.0B
Sustainable forestry/agriculture$1.1B$11.3B

Source: MSCI

Alternative energy, accounting for over $143 billion in green bonds, outpaces all other sectors by a wide margin. Within four years, renewable energy bond issuance has more than quadrupled.

Meanwhile, green building bonds are garnering attention. These instruments finance the construction of energy efficient buildings. Within the industry, a notable green building certification system is the LEED standard, also internationally recognized. Often, real estate investment trusts (REITs) are involved in issuing green building bonds.

Interestingly, Big Tech is also becoming more active within the green bond landscape. Google’s parent company, Alphabet, has issued a record $5.8 billion in corporate sustainability bonds to fund everything from energy efficiency projects to affordable housing.

The Top 10 Countries for Green Bonds

On a country-by-country level, green bonds are most common in the U.S., China, and France.

RankCountryGreen Bond Issuance2018-2019 Change (Amount)
1🇺🇸U.S.$50.6B44%
2🇨🇳China$30.1B1%
3🇫🇷France$29.5B113%
4🇩🇪Germany$18.7B144%
5🇳🇱Netherlands$15.1B105%
6🇸🇪Sweden$10.3B66%
7🇯🇵Japan$7.2B73%
8🇨🇦Canada$7B63%
9🇮🇹Italy$6.8B128%
10🇪🇸Spain$6.5B3%
Top 10 Total$181.8B49%

Source: Climate Bonds Initiative

Germany issued its first multi-billion dollar government green bonds in just 2019. One catalyst behind this was the European Central Bank’s announcement that the environment would become a “mission critical” priority going forward.

This may contribute to the fact that both Germany and France saw the biggest change between 2018 and 2019.

Opening the Floodgates

As sustainable investing becomes front and center on the global agenda, questions about its impact on returns have arisen.

During times of both extreme exuberance and market crisis, companies with higher sustainability ratings have outperformed their respective benchmark. However, there is still a long way to go. Even with the record issuance of green bonds in 2019, they make up just 3% of all global bonds issued.

As demand for sustainable investments quickly grows, could it spell a watershed decade ahead for green bonds?

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The 20 Most and Least Profitable Companies, Per Employee

The U.S. companies on the Fortune 500 boast $1.2 trillion in combined profit—but which bring in the best and worst profit per employee?

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The 20 Most and Least Profitable Companies, Per Employee

The Fortune 500 is an elite club of the biggest American businesses, which combined to generate profits of over $1.2 trillion in 2019.

But how much profit do these companies make on a per employee basis?

This visualization uncovers the answer by comparing the 20 companies with the most and least returns per employee, using calculations from Tipalti (based on the Fortune 500 list).

Top 20: Most Profit per Employee

Diving right in, the companies that make the most money per employee may surprise you.

Housing giants Fannie Mae and Freddie Mac take two of the top three spots, bringing in $1.9 million and $1.0 million per employee respectively in 2019.

The two U.S. government sponsored enterprises (GSEs) are major players in the secondary mortgage market, buying and repackaging nearly half the mortgages in the country. The duo was allowed to retain their profits as of October 2019, instead of returning them to the U.S. Treasury.

CompanySectorProfit per EmployeeProfits ($M)Employees
Fannie Mae
(Federal National Mortgage Association)
Financials$1,888,000$14,1607,500
KKRFinancials$1,448,699$2,0051,384
Freddie Mac
(Federal Home Loan Mortgage Corporation)
Financials$1,046,721$7,2146,892
NRG EnergyEnergy$969,631$4,4384,577
EOG ResourcesEnergy$943,103$2,7352,900
BiogenHealth Care$795,811$5,8897,400
Blackstone GroupFinancials$705,680$2,0502,905
ConocoPhillipsEnergy$691,250$7,18910,400
Enterprise Products PartnersEnergy$628,904$4,5917,300
VisaBusiness Services$619,487$12,08019,500
Simon Property GroupFinancials$560,533$2,1023,750
Gilead SciencesHealth Care$456,441$5,38611,800
OneokEnergy$443,789$1,2792,882
FM GlobalFinancials$443,391$2,4795,591
MastercardBusiness Services$436,452$8,11818,600
Cheniere EnergyEnergy$423,529$6481,530
FacebookTechnology$411,308$18,48544,942
AppleTechnology$403,328$55,256137,000
Cincinnati FinancialFinancials$384,038$1,9975,200
Massachusetts Mutual Life InsuranceFinancials$373,989$3,7019,896

Apple employs 137,000 people—the largest workforce by far among the 40 companies profiled—but still makes $403,328 per employee. Facebook is the only other tech giant to bring in more money per employee at $411,308.

Bottom 20: Least Profit per Employee

On the other end of the spectrum, Uber is one of the most well-known companies currently bleeding profits, losing $316K per employee. In fact, the ride-hailing service lost approximately $1.8 billion in the second quarter of 2020 alone.

CompanySectorProfit per EmployeeProfits ($M)Employees
ApacheEnergy-$1,123,301-$3,5533,163
EnLink MidstreamEnergy-$825,830-$1,1191,355
Brighthouse FinancialFinancials-$556,391-$7401,330
PG&EEnergy-$332,870-$7,65623,000
Frontier CommunicationsTelecommunications-$322,706-$5,91118,317
Uber TechnologiesTechnology-$316,208-$8,50626,900
HessEnergy-$229,859-$4081,775
CotyHousehold Products-$199,158-$3,78419,000
Devon EnergyEnergy-$197,222-$3551,800
Altria GroupFood, Beverages & Tobacco-$177,123-$1,2937,300
National Oilwell VarcoEnergy-$175,927-$6,09534,645
Equitable HoldingsFinancials-$171,584-$1,73310,100
Chesapeake EnergyEnergy-$133,913-$3082,300
CenturyLinkTelecommunications-$123,976-$5,26942,500
MosaicChemicals-$84,683-$1,06712,600
AlcoaMaterials-$81,522-$1,12513,800
Targa ResourcesEnergy-$77,985-$2092,680
Voya FinancialFinancials-$58,500-$3516,000
WayfairRetailing-$57,992-$98516,985
Occidental PetroleumEnergy-$46,319-$66714,400

COVID-19 has also had an intense effect on some of the companies at the bottom end of the profit per employee spectrum. Chesapeake Energy and Frontier Communications are just two examples that have filed for Chapter 11 bankruptcy in recent months—they each lost $134K and $322K per employee in 2019 respectively.

I’m pretty confident we will see more bankruptcies than in any business person’s lifetime.

James Hammond, CEO of BankruptcyData

Profit per Employee by Sector

When all the companies in the Fortune 500 are taken into account, sector-specific numbers reveal interesting trends.

Financials bring in the most profit per employee at $116K, while Food and Drug Stores see 17 times less profit at $6.7K per employee. In fact, eight out of the top 20 most profitable companies are found in the financial sector.

SectorProfits per EmployeeProfits ($M)Employees
Financials$116,228$378,4453,256,067
Technology$87,532$252,8362,888,490
Energy$85,547$75,410881,505
Media$57,947$21,634373,333
Health Care$54,679$145,1662,654,872
Telecommunications$50,636$38,251755,417
F&B incl. Tobacco$41,946$42,9241,023,317
Business Services$39,354$36,835936,000
Chemicals$27,977$11,328404,888
Apparel$26,154$7,776297,300
Industrials$25,827$27,0061,045,675
Aerospace & Defence$24,793$23,903964,100
Household Products$24,504$10,415425,038
Transportation$21,762$32,4541,491,358
Engineering & Construction$19,648$6,773344,716
Materials$13,408$6,024449,252
Retailing$10,373$67,3186,489,923
Hotels, Restaurants & Leisure$9,653$16,8801,748,714
Wholesalers$9,025$5,842647,312
Motor Vehicles & Parts$8,113$7,108876,123
Food & Drug Stores$6,746$8,3551,238,645

Interestingly, as a whole, the energy sector comes in third place in terms of profit per employee at $86K—that said, nine out of the bottom 20 least profitable companies are also found in this highly volatile industry.

Though the vast majority of businesses impacted by COVID-19 have been small to mid-sized companies, the above calculations also show that Fortune 500 companies are not safe, either.

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