In 1966, Berkshire Hathaway’s Warren Buffett flew to California to meet Walt Disney, the company’s co-founder, to discuss plans for the company, which had opened Disneyland in the state.
Recalling the visit, Buffett said, “I went out to see Walt Disney. We sat down, and he told me (about) the whole plan for the company — he couldn’t have been a nicer guy.” The meeting was fruitful, and Buffett bought a 5% stake in Disney for $4 million.
The ace investor explained, “The whole Walt Disney Company was selling for $80 million in 1966, debt-free. $4 million bought us 5% of the company. They spent $17 million on the Pirates (of the Caribbean) ride. Here was a company selling at less than 5x rides — and they had a lot of rides! That is cheap.”
50% profit a mistake? Here’s why Warren Buffett thinks so…
Just a year later, in 1967 (unlike his usual policy to hold for long), Berkshire sold its 5% stake in Disney for $6 million — a 50% profit. Looking back, the Oracle of Omaha called the sale a mistake.
“Mary Poppins had just come out. Mary Poppins made about $30 million that year, and seven years later, you’re going to show it to kids the same age. It’s like having an oil well where all the oil seeps back in. They had 200 films of some sort, they had 300 acres down in Anaheim, with Disneyland drawing 9 million people a year, and the whole place was selling for $80 million bucks!” he told an audience.
“And we sold 5% for $6 million in 1967 — that would be worth a billion now,” he told the audience, eliciting laughter; adding, “But that’s something that conventional accounting does not pick up. That’s the kind of mistake I made.”
As on date now, the same 5% stake in Disney would be worth somewhere between $8-10 billion.
‘Not a source of distress’: Here’s what you can learn
Answering a question about the Disney stock sale at the Berkshire AGM in 1988, Buffett again called the move a mistake but added that it is “not a source of distress”.
“I should have been buying; I forgot about holding, and that’s happened many times. We think that anything we sell should go up subsequently because we own good businesses. We may sell them because we need money for something, but they’re still good businesses. And good businesses are going to be worth more over time,” he said.
Here’s what you can learn from Buffett when it comes to regrets — let it go. “Everything that I sold in the past, that I can think of, has gone on to sell for a lot more money than I would expect. That is not a source of distress… maybe some of the money went into Coca-Cola, so I don’t worry about it,” he stated.
Today, Berkshire holds some of Disney stock. How? It funded Capital Cities’ $3.5 billion acquisition of ABC in 1985 and the media company was later bought by Disney in the 1996 for $19 billion. The merger gave Berkshire a 3.6% stake in the conglomerate.
