Six years ago, when Berkshire Hathaway took an $11 billion write-down of its $37.2 billion 2016 acquisition of Precision Castparts, Warren Buffett wrote in his annual letter to shareholders he had paid "too much" for the company, which makes "complex metal components and products."
While it was a "fine company – the best in its business," he had been "simply too optimistic" about its profit potential, a "miscalculation ... laid bare" by the enormous downturn for the aerospace industry, Precision Castparts' largest customers, amid the Covid pandemic.
In a CNBC interview when the deal was first announced, Buffett admitted it was "a very high multiple for us to pay," but told shareholders at the 2016 meeting he had great confidence in Mark Donegan, the company's CEO, both then and now, and the company's long-term profit outlook.
It's taken longer than he planned, but Buffett's purchase is now looking pretty good.
As Reuters puts it, there is currently a shortage of the "complex" products Precision Castparts makes that are essential for engine turbine blades.