Berkshire Hathaway (BRK.A -1.39%) (BRK.B -1.07%) CEO Warren Buffett is widely considered to be one of the greatest investors of our time. Since taking the helm at conglomerate Berkshire Hathaway, the Oracle of Omaha, as he's affably known, has led his company's stock to an annual average return of 20%. That might not sound all that impressive, but when done on an annual basis since 1964, it equates to a better than 2,800,000% return on investment.

Perhaps the craziest thing about Buffett's investing style is that he's not doing anything John and Jane Q. Investor couldn't themselves do...short of buying another company outright. He's made a living by focusing his research on a handful of sectors, purchasing businesses that he believes have sustainable competitive advantages, and, most importantly, holding those stakes for very long periods of time.

But one thing the Oracle of Omaha is not is perfect. Like all investors, Buffett has made his fair share of mistakes. In his case, some of these mistakes cost Berkshire Hathaway billions of dollars. Here are three of Warren Buffett's biggest billion-dollar blunders.

Warren Buffett at his company's annual shareholder meeting.

Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

Selling Walt Disney not once but twice: A more than $31 billion error

The unquestioned mother of all goofs for Buffett was his premature selling of theme park operator and content-creation machine Walt Disney (DIS -2.68%).

Back in 1966, Buffett and a consortium of investors decided to put $4 million to work in Disney, giving the consortium a cool 5% stake in the company. At the time, Walt Disney was in the midst of adding attractions to its Disneyland theme park in Southern California, and the company had a handful of successful films. But with a market valuation of $80 million, it wasn't exactly a powerhouse.

The following year, in 1967, Buffett and his team sold their stake for $6 million, ultimately netting a 50% return on investment. However, with Walt Disney stock ending last week with a market cap of $341 billion, selling for a 50% gain looks to have effectively cost Buffett and his team $17 billion in gains. Also, don't forget the more than $1 billion dividend income that would have been collected on this stake, so it's really more like an $18 billion error.

Now here's the "D'oh!" moment: Buffett got a second chance to own Disney stock and again sold relatively quickly. In 1995, when Disney announced that it would acquire Capital Cities/ABC in a cash-and-stock deal, Berkshire Hathaway received Disney stock (it was a Capital Cities/ABC shareholder). In 1996, Buffett's company reported owning 24,614,214 shares, which were split 3-for-1 in 1998 and sold in their entirety between 1999 and 2000. Buffett's cost basis on these shares was $577 million, but they'd be worth almost $13.9 billion today.

All told, between the 1967 divestment, the 1999-2000 share sale, and the forgone dividend income, Buffett has given up a not-so-Goofy $31 billion-plus in potential gains from Disney.

A commercial airplane on the tarmac, preparing to take off.

Image source: Getty Images.

Selling airline stocks during the height of the pandemic: About a $4.6 billion boo-boo

Even though I wholeheartedly agreed with the move at the time, the Oracle of Omaha's handling of his airline stocks during the coronavirus pandemic was less than stellar.

As of the end of the first quarter of 2020, Berkshire Hathaway owned sizable stakes in four major airlines:

  • Delta Air Lines (DAL -1.62%): 71,886,963 shares
  • Southwest Airlines (LUV -3.44%): 53,642,713 shares
  • United Airlines (UAL -2.88%): 22,157,608 shares
  • American Airlines (AAL -3.45%): 41,909,000 shares

But early in the second quarter of 2020, Buffett and his team sold all four stakes in their entirety. Although we don't precisely know what Berkshire Hathaway sold these stakes for, we can estimate what sort of unrealized gains or recouped value has been lost. Taking into account the holdings listed above, Buffett has forgone the following gains over the trailing year (through April 11, 2021):

  • Delta Air Lines: $1.87 billion
  • Southwest Airlines: $1.56 billion
  • United Airlines: $654 million
  • American Airlines: $502 million

By my estimation, dumping airline stocks at very nearly the trough of the pandemic has cost Berkshire Hathaway in the neighborhood of $4.6 billion.

For what it's worth, I believe Buffett is right to be leery of the airlines. For instance, American Airlines took on a boatload of debt and will struggle with growth initiatives due to servicing its $41 billion in total debt. Likewise, any airlines that took coronavirus relief capital won't be paying dividends or repurchasing their common stock any longer.

A Home Depot sales associate carrying a paint can in each hand.

Image source: Home Depot.

Selling Home Depot & Lowe's shortly after the Great Recession: A $2.3 billion mistake

Lastly, Warren Buffett might well be kicking himself for selling his company's stakes in do-it-yourself (DIY) home-improvement retailers Home Depot (HD -1.29%) and Lowe's (LOW -1.44%) following the Great Recession.

According to company filings with the Securities and Exchange Commission, Berkshire Hathaway had previously owned as many as 3.7 million shares of Home Depot. Approximately a quarter of this stake was sold in mid-2009, with the remainder jettisoned in the third quarter of 2010. My ballpark estimation is that these sales raised around $110 million in capital.

However, Home Depot's share price has skyrocketed about tenfold from where Berkshire Hathaway dumped its stake. A 3.7-million-share stake in Home Depot today would be worth almost $1.2 billion.

It's a similar story with Lowe's. In the fourth quarter of 2010, just one quarter after Home Depot was kicked to the curb, Buffett and his team sold Berkshire's entire 6.5-million-share stake in Lowe's. At the time, selling Lowe's stock raised around $160 million in capital.

But if the Oracle of Omaha had held his company's position in Lowe's, those 6.5 million shares would have a market value of close to $1.3 billion today.

Tack on a little more than $200 million in forgone dividends for both companies on a combined basis, and Buffett's hasty sales on these do-it-yourself giants have cost approximately $2.3 billion in missed gains.

If there's anything we've learned about these DIY giants, it's that they can benefit in almost any environment. A booming economy means plenty of demand from the contractor side of the business. Meanwhile, a weakened economy tends to do wonders for home renovations and projects. This is something the Oracle of Omaha appears to have overlooked, and it's cost him dearly.