When the history books are written, Warren Buffett will likely go down as one of the greatest investors of our time. In a little more than six decades, the Oracle of Omaha, as he's affably known, has grown roughly $10,000 in seed capital to a net worth of almost $80 billion. Mind you, his net worth would extend well beyond $100 billion if not for generous charitable contributions throughout the years.
As the CEO of conglomerate Berkshire Hathaway (BRK.A 0.10%) (BRK.B -0.01%), Buffett has overseen the acquisition of roughly five dozen businesses from a variety of industries and sectors, as well as countless investments. Right now Berkshire Hathaway oversees an investment portfolio with a net worth of more than $200 billion, and also has a war chest of $122.4 billion, as of the end of its most recent quarter. Suffice it to say, Buffett has had a lot of success as an investor.
But one thing Buffett and his team are not is perfect. Even the greatest investors on the planet are bound to make mistakes from time to time, and Buffett is no exception.
Since the beginning of the year, a vast majority of Berkshire Hathaway's 47 securities still held in its portfolio as of June 30, 2019, have gone up. That's generally good news for Berkshire shareholders and Buffett's long-term buy-and-hold ethos. However, four laggards in Buffett's portfolio have cost the company a pretty penny on a year-to-date basis. Combined, the following four stocks have lost almost $6.1 billion in value in 2019, inclusive of dividends paid.
Kraft Heinz: $5.13 billion in market value lost
There's no question that the disaster du jour for Buffett in 2019 has been the utter collapse of food and beverage company Kraft Heinz (KHC 0.35%), which is down almost 41% through August. The 325.6 million shares of Kraft that Berkshire Hathaway owns gives it a whopping 26.7% stake in the company -- and also quite the red mark in 2019.
The big issue with Kraft Heinz is its ugly balance sheet. Earlier this year, the company took a $15.4 billion writedown on a number of its popular brands, although it's still left with $36 billion in goodwill and $29.8 billion in long-term debt as of its most recent quarter. What Kraft Heinz needs is to spend money to reignite growth in its brands, but it simply doesn't have the financial means to do so. Kraft Heinz may be forced to sell some of its brands to reduce its long-term debt, but selling in a position of weakness is unlikely to get the company its asking price. And, as the icing on the cake, the company also reduced its dividend.
Though Buffett has admitted that Berkshire overpaid for its stake in Kraft Heinz, he's also committed to the position. The problem with being such a large shareholder is that there isn't a good way to pare down Berkshire's stake without adversely impacting Kraft Heinz's stock. For the time being, Buffett can do no more than watch and wait for Kraft Heinz to right the ship.
Teva Pharmaceutical Industries: $368.5 million in market value lost
While Kraft Heinz is Berkshire's monetary loser, brand-name and generic-drug developer Teva Pharmaceutical Industries (TEVA -1.45%) is the company's biggest percentage loser, with 55.3% of its market value being wiped away through August. Even though Teva wasn't a direct Buffett pick -- a member of his team chose to purchase Teva -- it's nevertheless cost nearly $369 million in 2019.
Teva has been a mess for the better part of two years now, having contended with a bribery scandal, the departure of top-level executives, the loss of exclusivity on its top-selling brand-name drug Copaxone for multiple sclerosis, and generic-drug price weakness. To make matters worse, the company has also been contending with a slew of opioid-based lawsuits. With Teva sporting more than $28 billion in debt, there's real concern about the company's ability to survive and thrive over the long run, which has been clearly reflected in its share price.
As a Teva shareholder, I don't deny the issues that lie ahead. However, as one of the largest generic-drug producers in the world, Teva shouldn't be written off just yet. The company remains profitable, and CEO Kare Schultz has overseen a roughly $8 billion reduction in net debt and the elimination of almost $3 billion in annual expenses. The turnaround could be slow, but I expect Teva to be just fine.
Bank of New York Mellon: $339.1 million in market value lost
Surprisingly, the traditionally nonvolatile Bank of New York Mellon (BK 0.35%) has been something of a lemon for Warren Buffett in 2019. The custodial bank and asset management firm has lost about 11% of its value, which, inclusive of dividends, has saddled Berkshire with a year-to-date loss of $339.1 million.
Bank of New York Mellon has been dealing with two issues that have negatively impacted its business. The first has to do with interest rates. The inversion of the yield curve, coupled with the Federal Reserve reversing course from monetary tightening to loosening, is expected to negatively impact the company's net interest income for numerous quarters.
The other problem it's encountered is persistent cash outflows from index-based investment products. It's pretty evident that investors are concerned about the stock market right now, and that has the potential to impact how much fee revenue Bank of New York Mellon generates from the asset management side of the business.
As a whole, this looks to be just a small blip for an otherwise successful and established provider of dividend income. I'd expect Buffett to recoup this $339.1 million with ease over the long run, inclusive of dividends paid.
American Airlines Group: $240.8 million in market value lost
Lastly, whereas most airlines have delivered modest gains in 2019, American Airlines Group (AAL -0.81%) has mostly been grounded. Shares of the major airline have declined by 18% year to date, which translates into a loss of almost $241 million for Berkshire Hathaway.
Similar to the other laggards listed here, it isn't just one thing costing Buffett and Berkshire Hathaway money. Rather, it's a myriad of problems. For instance, American Airlines has been contending with labor issues. The company noted a stark increase in cancellations and delays tied to maintenance write-ups in a couple of the cities it services, potentially signaling deliberate action on the part of mechanic unions to coerce contract negotiations, which have been ongoing for some time. American Airlines has also been impacted by the grounding of Boeing's 737 MAX.
Furthermore, American Airlines looks to be in far worse shape than its peers when it comes to the company's balance sheet. Even though lending rates have remained low -- and should stay that way with the yield curve inverting and the Fed now easing -- American Airlines is lugging around an unsightly $34.8 billion in debt, or more than $29 billion in net debt. If a recession does present itself, it's unclear how well the company would fare.
Don't be surprised if Buffett decides to pare some of his position in American Airlines in the coming quarters.