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Berkshire Was Worst Investment, Buffett Tells CNBC

Warren Buffett, who amassed the world’s third-biggest personal fortune through decades of stock picks and takeovers, told CNBC his worst investment was the textile mill that gave its name to Berkshire Hathaway Inc.

The worst stock he “ever bought was, drum roll here, Berkshire Hathaway,” Buffett, Berkshire’s 80-year-old chairman and chief executive officer, said in an interview broadcast today on the business-news channel. Buffett had “committed a major amount of money to a terrible business.”

Buffett and his investment partners paid about $14 million in the 1960s for a controlling interest in Berkshire Hathaway, then a New Bedford, Massachusetts-based manufacturer of men’s suit linings, according to biographer Andrew Kilpatrick. Buffett spent less than rivals on improvements to equipment and used Berkshire’s earnings to help fund investments, including the 1967 acquisition of insurer National Indemnity Co.

“The textile operations never paid off,” Kilpatrick said in his “Of Permanent Value: The Story of Warren Buffett.” “Berkshire would become one of the few businesses that never really made it under Buffett.”

Buffett wound down production of textiles and in 1985 sold the mill’s equipment for $163,122, he said in the letter that accompanied that year’s Berkshire annual report. Berkshire reported $435.8 million of profit in 1985, more than double its total in the previous year, on investment gains and earnings from businesses including insurance, newspapers and candy. Textiles produced a loss of $1.32 million that year.

‘Leaking Boat’

“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks,” Buffett said in the letter.

Buffett, Berkshire’s biggest shareholder, ranks behind Carlos Slim and Microsoft Corp. co-founder Bill Gates on Forbes magazine’s list of billionaires. At Berkshire, he manages an equity portfolio valued at $54.7 billion on June 30 and oversees the CEOs of more than 70 subsidiaries, including car insurer Geico Corp., power producer MidAmerican Energy Holdings Co. and railroad Burlington Northern Santa Fe.

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