Just now, massive impairment, Buffett's "one of the biggest investment failures", but the stock god is still the stock god.

When the book value of an investment is "halved" within a few years, it usually means a complete failure - but when the protagonist is Warren Buffett, the story may need to be interpreted from a different perspective. On August 2nd (Saturday), Berkshire Hathaway, owned by Warren Buffett, disclosed in regulatory filings that the company had made a staggering $3.8 billion write-down on its investment in Kraft Heinz, reducing its book value to $8.4 billion, a significant decrease from over $17 billion at the end of 2017. This event confirms the judgment of the outside world on the failure of this investment, but analysis by the Financial Times pointed out that, due to the superior terms Buffett negotiated in the deal, even in this recognized "Waterloo," he is still a winner. "A rare failure": an investment halved For the 94-year-old Buffett, this write-down is undoubtedly a rare setback in his illustrious investment career. Berkshire clearly stated in the filing that part of the reason for this write-down was the continued decline in the fair value of Kraft Heinz. In 2015, Buffett played a key role in the merger of Kraft and Heinz. However, since the merger, the stock price of this packaged food giant has dropped 62%, while the S&P 500 index has risen by 202% over the same period. The significant difference makes this investment stand out. Kyle Sanders, an analyst at Edward Jones, bluntly stated that this write-down "should have been done a long time ago" and called it "one of Warren's biggest mistakes in the past few decades." In recent months, Berkshire has begun to distance itself from Kraft Heinz. In May of this year, Kraft Heinz announced that Berkshire had given up its seat on the board of directors. Sanders believes that giving up the seat, along with this write-down, "is providing more flexibility for a possible exit from this holding in the future." The other side of the story: why the stock god is still not losing? Despite the poor performance of the investment, an analysis by the Financial Times revealed the other side of the story: betting against Buffett is usually not a good idea. According to the newspaper's Lex column, Berkshire originally paid $4.3 billion for its stake in Heinz, and during the merger with Kraft, added to the investment, bringing its total investment in Kraft Heinz common stock to $9.8 billion. Today, its 27.4% stake is valued at approximately $8.8 billion. On the surface, it seems like a loss, but the calculations must include dividends. The Lex column pointed out that over the years, Berkshire has received about $6.3 billion in cash dividends from this investment. Therefore, with a comprehensive calculation ($8.8 billion market value + $6.3 billion dividends), Buffett's total return on this common stock investment is still nearly 60%. What is more noteworthy is that Buffett also purchased $8 billion of Heinz preferred stock under more favorable terms. This preferred stock not only paid over $2 billion in dividends but was also fully redeemed three years later. This part of the investment brought Buffett a fast and steady huge profit. Sharp contrast between Buffett and other shareholders Buffett's "golden touch" shines even brighter in comparison with other shareholders. According to the Financial Times' calculation, for those shareholders who held original Kraft Foods stock since the 2015 merger, their situation is considered "meager." Adding up the one-time cash payments, annual dividends, and current market value of Kraft Heinz stock they hold, the total return over ten years is only 8%. If they had chosen to invest in Unilever instead - the company Kraft Heinz tried to acquire in 2017 but failed - their funds would have almost doubled. All of this confirms the two lessons proposed by the article: first, merging two mediocre companies does not create a great company. Kraft Heinz is facing challenges as consumers shift to healthier foods, and the company is expected to see a 3% decline in revenue this year. Secondly, Buffett always manages to negotiate better deals for himself than others, which allows him to produce decent results even in the worst mistakes. Text from "Wall Street News", author: Long Yue; GMTEight Editor: Yan Wencai.