Buffett's confidence in troubled decade-old acquisition finally pays off

• Berkshire took an $11 billion writedown on Precision Castparts in 2020 after the pandemic devastated aerospace customers, with Buffett admitting he paid 'a very high multiple' and was 'too optimistic' about profit potential
• Based on GE Aerospace's 26x earnings multiple for its $3.3 billion competitor acquisition, analysts now estimate Precision Castparts is worth approximately $100 billion, up from the $37.2 billion 2016 purchase price
• Demand surge is fueled by aerospace recovery and natural gas turbines needed for AI data centers, creating shortages of the complex engine turbine blade products that Precision Castparts specializes in manufacturing

Summary

Warren Buffett's 2016 acquisition of Precision Castparts for $37.2 billion is finally proving its value, nearly a decade later. Berkshire Hathaway took an $11 billion writedown on the investment in 2020 due to the aerospace industry downturn during COVID-19, with Buffett admitting he had been "too optimistic" about profit potential and paid "a very high multiple."

Key Development: The investment's fortunes have reversed as shortages emerge for Precision Castparts' complex products used in engine turbine blades and natural gas turbines—the latter increasingly demanded by AI data centers.

Market Validation: GE Aerospace recently announced it would acquire Standard Aero, a Precision Castparts competitor, for a price Barron's calls "pricey" at 26 times projected 2027 EBITDA. Using the same multiple, analysts estimate Precision Castparts is now worth approximately $100 billion—nearly three times its 2016 purchase price and well above previous valuations of $60-75 billion. This makes it one of Berkshire's most valuable divisions.

Stock Performance: Berkshire Hathaway B-shares traded at $510.37, outperforming the broader market, which saw the Dow and S&P 500 fall 0.8%. Year-to-date, Berkshire Class B shares are up 22.8% versus the S&P 500's 17.4% gain.

Other News: Berkshire held $365.5 billion in cash as of June 30 and repurchased $4.5 billion of its stock in Q2. Additionally, Nebraska Republican candidate Brinker Harding removed an ad featuring Buffett's image after his daughter Susie objected, citing lack of permission and implied endorsement.