While there are many great money managers, few are as well-known and successful as Berkshire Hathaway (BRK.A -0.32%) (BRK.B -0.42%) CEO Warren Buffett. Though Buffett has underperformed the benchmark S&P 500 over the past decade, he's absolutely run circles around the broad-based index over the last 55 years.

According to Berkshire Hathaway's 2019 annual shareholder letter, since 1965 the S&P 500 has returned a cool 19,784%, with Berkshire Hathaway's per-share gain coming in at 2,744,062%. Essentially, a $100 investment over those 55 years would now be worth more than $2.7 million. Buffett's buy-and-hold ethos has worked wonders for building up his net worth, as well as creating nearly $400 billion in value for Berkshire Hathaway's shareholders.

However, not every decision the Oracle of Omaha has made has worked out for him. One of the few times Buffett hasn't thought long-term has come back to bite him, big time.

Berkshire Hathaway CEO Warren Buffett at his company's annual shareholder meeting.

Berkshire Hathaway CEO Warren Buffett at his company's annual shareholder meeting. Image source: The Motley Fool.

Buffett's more than $19 billion goof

More than 50 years ago, in 1966, Warren Buffett went out to Anaheim, California, to meet with Walt Disney, the CEO of Disney (DIS -1.69%). At the time, the Disneyland theme park had been open for about 11 years, and its CEO was overseeing the construction of a new attraction, Pirates of the Caribbean. Buffett, who then had a handful of investment partners, was out looking for attractive investment opportunities. Disney certainly fit the bill, albeit the company didn't have the incredible content library then that it has today.

Buffett and his partners invested $4 million into Disney in 1966, taking a cool 5% stake for a company that was then valued at $80 million. However, Buffett and his team cashed out just one year later, pocketing a roughly $2 million profit (50% capital gain) in the process.

Although no one's ever gone broke taking a profit, Buffett has given up quite a bit of capital gains by cutting and running after only one year. You see, Disney stock ended last week with a market cap of $214.3 billion. A 5% stake still held today would be worth $10.7 billion, and would have returned more than $1 billion in added dividend income since 1966.

Believe it or not, Buffett actually got a chance at redemption with Disney, and once again blew it.

Mickey and Minnie Mouse greeting guests at Disneyland.

Image source: Disneyland.

In 1995, Disney announced that it was acquiring Capital Cities/ABC in a cash-and-stock deal valued at $19 billion. Since Capital Cities/ABC was a holding in Berkshire Hathaway's portfolio, it meant Berkshire would, again, own shares of Disney.

In Berkshire Hathaway's 1996 shareholder letter, the company is shown as owning 24,614,214 shares of Walt Disney. But between 1999 and 2000 Buffett and his team sold this stake. Taking into account a 3-for-1 split in 1998, this position would be worth $8.76 billion today, if not one share were sold. 

In other words, had Buffett thought really long-term on Disney and held his initial stake in 1966 and Berkshire's stake in 1995, it would be a $19.5 billion position today, which would unseat Coca-Cola as Buffett's third-largest investment by market value.

Four valuable lessons from Buffett's massive miscue

What can we learn from the Oracle of Omaha's biggest miscue?

To begin with, you should realize that nobody's perfect. No matter how much you'd like to have every stock you purchase head higher, that's just not going to be the case. Even Buffett, who's led Berkshire Hathaway to a 2,744,062% return in the past 55 years, is wrong from time to time. Accepting our humanity and the fact that we will be wrong on occasion is just as much a part of becoming a better investor as choosing great businesses.

A nearly empty hourglass next to a pile of coins and cash.

Image source: Getty Images.

Secondly, I think it's important to recognize that Buffett's views on investing have evolved over time, and yours should, too. There was once a time where consumer staples dominated Buffett's investment portfolio and bank stocks played a distant second fiddle. Today, banks are Buffett's favorite place to park his money. They're cyclical money machines tied to the health of the U.S. economy -- and Buffett won't bet against America.

Third, we've really witnessed Buffett take a longer-term approach to holding equities in recent decades. Though no investor goes broke taking a profit, short-term traders will end up leaving a lot of money on the table by trying to time the stock market. Buffett has come to understand the value of compounding and the luxury of a great night's sleep by thinking long term.

Fourth and finally, never sell a great business with clearly identifiable competitive advantages or moats. Buffett was never big on moats in his younger days, but he demands his investments these days hold easy-to-understand and sustainable competitive advantages that will lead to ongoing growth and profitability.

We're all probably going to have our own "Disney" moment, like Buffett, in our investing lifetime. The goal is not to make a habit of it.