Warren Buffett is widely regarded as the greatest investor of all-time. His massive $160 billion holding of Apple (NASDAQ:AAPL) stock has been called the greatest trade, and the positions he’s held for decades in blue-chip names including Coca-Cola (NYSE:KO) and American Express (NYSE:AXP) are frequently cited as the perfect examples of a buy-and-hold investing strategy. Buffett’s focus on strong financials and sound fundamentals over hot investing trends and fads is frequently held up as an example of midwestern common sense triumphing over the flash and hustle of Wall Street.
So it came as a shock recently to learn that, despite his successful track record, Buffett currently owns three of the worst stocks of all-time. Based on a study at Arizona State University, the company Visual Capitalist recently produced a graphic of the 25 worst stocks by shareholder wealth losses since 1926. The list includes notorious companies, many of which no longer exist, such as WorldCom, Nortel Networks and TimeWarner. Collectively, these terrible 25 have cost investors a combined $1.2 trillion in losses.
Buffett currently owns three of the names on the list. While surprising, it’s also somewhat comforting to see that, like the rest of us, Warren Buffett too has made a few bad stock choices that are dragging down his portfolio. Here are three of the worst stocks of all-time (that Warren Buffett still owns!).
Snowflake (SNOW)
Buffett’s investment in Snowflake (NYSE:SNOW) got a lot of attention as one of the rare times that the Oracle of Omaha bought into a company’s initial public offering (IPO). Throughout his career, Buffett has notably steered clear of IPOs because of their volatile nature. That and the fact that most companies that come to market are unprofitable, especially within the tech sector. However, Buffett surprised everyone in 2020 when his holding company, Berkshire Hathaway (NYSE:BRK-A/NYSE:BRK-B), got in on the IPO of Snowflake.
A cloud computing company based in Bozeman, Montana that’s focused on data analytics, Snowflake seemed like the type of specialty tech company that Buffett has long said is outside his “circle of competence.” This led to speculation that it was one of Buffett’s lieutenants who executed the investment in SNOW stock. However, at a minimum, Buffett would have had to approve the share purchase.
Turns out that getting in on the Snowflake IPO was a terrible decision.
According to Visual Capitalist, SNOW stock has cost investors a combined $30 billion in losses since its IPO three years ago. Snowflake’s share price is currently trading 33% lower than where it closed on its first day of trading back in September 2020. The Arizona State study notes that Snowflake has been one of the worst IPOs of all-time. Yet Berkshire Hathaway still owns more than six million shares in this dud, currently worth nearly $1 billion.
Paramount Global (PARA)
Since going public in 1987, movie studio and entertainment company Paramount Global (NASDAQ:PARA) has cost its shareholder a collective $30 billion in losses. The stock’s all-time gain over the last 36 years is a paltry 45%. Since 2018, PARA stock has lost 75% of its value, including a nearly 40% decline this year. Anyway you look at it, the company which owns the Paramount Pictures film studio, CBS television network, and specialty channels such as MTV and Comedy Central has been a horrible investment.
And yet, Warren Buffett currently owns almost 94 million shares of PARA stock worth $1.32 billion. What’s surprising here is that Paramount Global is one of Buffett’s newest positions. He began accumulating stock in Paramount in the first quarter of 2022. The timing couldn’t have been worse. In May of this year, Paramount cut its dividend payment to shareholders by nearly 80% to 5 cents a share per quarter as it contends with a steep drop in revenue from its traditional TV business. PARA stock fell 28% on news of the dividend cut.
Now, Paramount is dealing with the strike by Hollywood writers and actors that has brought TV and film production to a standstill and left the company’s fledgling streaming service without new content. All of the problems with Paramount stock are clearly bothering Buffett as he made mention of the company’s woes at this year’s Berkshire Hathaway annual meeting, something he almost never does. Still, the question remains: Why did Buffett buy into PARA stock in the first place?
Kraft Heinz (KHC)
Another stock Buffett has grumbled about publicly is Kraft Heinz (NASDAQ:KHC). What’s shocking in this instance is that Buffett helped to create Kraft Heinz Co. In 2013, Buffett bought the H.J. Heinz Company for $23 billion. Two years later, in 2015, he engineered a merger between Heinz and Kraft Foods to form Kraft Heinz Co. KHC stock began trading at $71 a share. Today, the shares trade at less than half that price. It’s a bitter disappointment that’s led Buffett to remark: “I was wrong in a couple of ways on Kraft Heinz… We overpaid for Kraft.”
On the surface, the creation of Kraft Heinz seemed like a slam dunk. The company, which makes ketchup, barbecue sauce, Jell-O, and Kraft dinner, seemed like the type of blue-chip consumer-focused company that Buffett is famous for investing in. Sadly, the merger never yielded the “synergies” and “economies of scale” that were initially promised. A move away from packaged foods by consumers, a $15.4 billion debt write-down, and a dividend cut have conspired to pull KHC stock lower. Berkshire itself took a $3 billion write-down on Kraft Heinz.
According to Visual Capitalist, shareholders have lost a total of $35 billion since KHC stock began trading, making it one of the worst investments ever. Yet Buffett is holding on. He currently owns more than 325 million shares of KHC stock worth $10 billion. In interviews, Buffett has said he has no intention of throwing in the towel on Kraft Heinz despite the stock’s poor performance, noting that the company has many strong consumer brands in its portfolio of products.
On the date of publication, Joel Baglole held a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
