A potential $20 billion was left on the table when the investment experts sold Disney stock on two occasions. Omaha met Walt Disney in 1966 back when the value of Disney was less than $90 million — about 0.04% of its current market capitalization.
“At Disneyland, the $17 million Pirates of the Caribbean ride would soon open,” Buffett wrote in his 1995 letter to shareholders. “Imagine my excitement — a company selling at only five times rides!”
The future chairman and his partner rushed to buy a 5% stake in Disney at the cost of $4 million, by 1995 the value had more than doubled. “That decision may appear brilliant,” Buffett wrote. “But your chairman was up to the task of nullifying it.”
This proved true as just a year after the purchase Buffett sold the shares netting a meagre 55% profit. This disappointing fact must follow Omaha as today a 5% stake in Disney would be worth an eye-watering $12.3 billion.
Unfortunately, this was not the last bad decision made. Buffet assisted in a deal for Disney to acquire Capital Cities/ABC, one of Berkshire Hathaway’s biggest investments, in 1995. The conglomerate netted about $1.4 billion in after-tax cash and a 3.6% stake in Disney from the sale. That holding which was sold within three years would today be valued at $8.9 billion.
If the stakes in Disney had not been sold the combined 8.6% would be worth more than $21 billion, they would have also received north of $1.5 billion in dividends.