Reading Warren Buffett’s biography taught me that this master investor shines not when his holdings went up, but when his holdings went down. And today he is going to demonstrate why he is called the greatest investor of all time… Or is he, still?
Just try to google “kraft heinz buffett” and you will see a picture of what happened. The stock KHC went down 27.46% in just one day upon disappointing earnings, dividend cuts and SEC investigation about questionable accounting practices. His stake in the company that is worth around $17 billion went down to $13 billion (a loss of $4billion) in just one day. And you can see all the people in the news that says, his old style of investing is not working anymore.
I am writing this post not to join in on what others think that the old guy has lost its touch. Many people has said that line in 2000, in 2007 and were proven wrong after. I am writing this post to remind myself and other value investors to pay attention to what will happen next. What will be the next move of Warren Buffett that we can all learn from.
Being a young investor in this field, I can only learn from the books and biographies that Warren has already done. But that has a bit of hindsight bias over it. But today, we are given an opportunity to watch him closely of what his actions are going to be moving forward.
Buffett may have lost $4 billion and his stake may have been reduced to $13 billion from a high of $17 billion. But his cost basis is just $9.8 billion, so he is still up around $2 billion on his investment. That’s margin of safety for you. Buying so cheap that even a drop of 30% would still put you in the money.