Warren Buffett, the CEO of Berkshire Hathaway, has seen a significant financial setback over the past year. Buffett, known for his incredible track record, misjudged the U.S. corporate tax rate. During Berkshire Hathaway’s annual shareholder meeting in May, Buffett expressed his belief that the corporate tax rate would rise.
This influenced the company’s decision to sell substantial shares of Apple over the last year. However, the recent election results proved Buffett’s forecast incorrect. President-Elect Donald Trump’s victory ensures that corporate tax rates will remain unchanged for at least four years.
During four consecutive quarters, Berkshire sold:
10,000,382 shares of Apple in Q4 2023
116,191,550 shares of Apple in Q1 2024
100,000,000 shares of Apple in Q3 2024
Based on Apple’s average share price during each of these quarters and its closing price of $227.48 per share on Nov. 7, Buffett’s decision has cost Berkshire Hathaway close to $21.2 billion in potential gains.
Buffett’s tax rate miscalculation
This is due to Apple’s significant appreciation during the period Berkshire reduced its stake. Buffett’s strategy was based on the expectation that corporate tax rates would eventually rise. However, the continued low-tax environment has proven him wrong in this instance.
Despite this substantial loss, Buffett remains a revered figure in investing. His willingness to act on his convictions continues to earn him respect in finance. While Buffett’s miscalculation has led to a notable financial setback for Berkshire Hathaway, it highlights the unpredictability of market conditions and tax policies.
Even the most successful investors can make mistakes from time to time.
