Precision Castparts: Warren Buffett’s Losing Bet Turns into a Treasure

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The story centers on Warren Buffett’s investment in Precision Castparts, which Berkshire Hathaway acquired in 2016 for $37.2 billion. The deal subsequently became one of the most controversial acquisitions of Buffett’s career.

A Massive Write-Down Exposes Buffett’s Mistake

Six years ago, when Berkshire Hathaway recorded an $11 billion write-down on its acquisition of Precision Castparts, Warren Buffett acknowledged in his annual letter to shareholders that he had “paid too much” for the company, which manufactures complex metal components and products.

Buffett described Precision Castparts as a good company, “perhaps the best in its field,” but admitted that he had been “too optimistic” about its earnings potential. That mistake became painfully apparent when the COVID-19 pandemic triggered a sharp collapse in the aerospace industry, the company’s largest customer market.

Buffett’s Confidence Survives the Crisis

In an interview with CNBC when the acquisition was first announced, Buffett acknowledged that the price represented “a very high multiple for us to pay.” Nevertheless, he told shareholders at Berkshire Hathaway’s 2016 annual meeting that he had great confidence in Mark Donegan, the company’s then-chief executive, who continues to lead it, as well as in its long-term earnings prospects.

Although the recovery took longer than anticipated, Buffett’s acquisition now appears to be in a much stronger position.

Supply Shortages Boost the Company’s Value

Reuters has reported a current shortage of the specialized products manufactured by Precision Castparts, which include critical components used in aircraft engine turbine blades.

These products are also used in natural gas turbines, which are experiencing rising demand as power providers seek to generate the electricity needed by data centers supporting artificial intelligence applications.

GE Aerospace Agrees to Pay $11.75 Billion

GE Aerospace has announced that it will pay $11.75 billion to acquire Consolidated Precision Products, one of the few companies competing with Precision Castparts.

Barron’s considers the transaction expensive, valuing Consolidated Precision Products at 26 times its projected 2027 earnings before interest, taxes, depreciation and amortization (EBITDA).

Valuation Approaches $100 Billion

Applying the same multiple, Barron’s estimates Precision Castparts could be worth approximately $100 billion. That is substantially higher than the magazine’s previous estimate of $60 billion to $75 billion, published in an article last month that suggested the business may have become one of Berkshire Hathaway’s most valuable subsidiaries.

The implied valuation is nearly three times the $37.2 billion Berkshire Hathaway paid to acquire the company in 2016.

Berkshire Hathaway Is Not Getting Enough Credit

In his Barron’s article, Andrew Bary argued that Berkshire Hathaway and its stock price were not receiving sufficient recognition for the increase in value of the subsidiary.

One reason, he suggested, is that Greg Abel, Berkshire Hathaway’s chief executive, does not hold analyst conference calls or investor events in the same way Buffett did to draw attention to the performance of individual businesses.

Bary concluded that Berkshire Hathaway, without Buffett at the helm, may need to start telling its own story if it hopes to attract a new generation of investors. He added that the stock’s performance this year suggests that something may need to change.

Berkshire Shares Defy a Wall Street Decline

Berkshire Hathaway shares posted modest gains in the middle of last month, even as major Wall Street indexes declined, offering a slight departure from the broader trading pattern in 2026 that Bary had highlighted.

Class A and Class B shares each rose approximately 0.9%, while the S&P 500 fell 0.8%.

Oil Prices and Bond Yields Weigh on Stocks

Before the rebound, the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite had all declined for four consecutive sessions as oil prices and bond yields climbed.

Despite Berkshire’s relative resilience during that session, its Class B shares remained more than 10 percentage points behind the S&P 500’s performance since the beginning of the year.

Buffett Appears in Campaign Advertisement for Seconds

The campaign team of a Republican candidate running for Nebraska’s Second Congressional District moved quickly to release a revised political advertisement after Susie Buffett objected to an earlier version that briefly featured an image of her father, Warren Buffett.

In the advertisement, Buffett’s image and name appear on screen for approximately two seconds as candidate Brinker Harding says: “Here in Omaha, we know a thing or two about the stock market. Some of us more than others, but we do it without insider information.”

Harding then highlights his call to ban members of Congress from trading individual stocks, arguing that some lawmakers “trade on secrets you’ll never know” while “getting rich” as ordinary Americans struggle to make ends meet.

The Buffett Family Calls for the Advertisement to Be Removed

KETV, the Omaha-based ABC affiliate, reported that Susie Buffett asked Harding to remove the advertisement on September 2.

“I think it’s important to make it clear that Warren did not give Brinker permission to use his image or name in his ad,” she told the station.

“It implies that my dad endorses him, but he did not give him permission to use that,” she added.

Campaign Releases a New Advertisement

KETV also quoted Harding as saying in a statement: “Nebraskans work hard and support one another, and we do it honestly. Warren Buffett embodies that, and that was the point of my ad.”

The station reported that Harding did not comment on whether the original advertisement would be withdrawn, but noted that new campaign advertisements had already begun appearing on some television stations.

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