Sometimes luck helps Warren Buffett’s audacity. An old investment that was down by $10 billion is now worth $70 billion.

Warren Buffett is always right. Even when he admits he was wrong. The case being discussed today in the American press is Precision Castparts, a company that many of our readers—and retail investors—may never have heard of. It produces precision parts historically used in commercial aviation. The company was acquired in its entirety in 2016 and cost the group more than $30 billion. Then, after COVID, the company recorded losses of nearly $10 billion on its balance sheet. Today, however, things appear to have changed, in Warren Buffett’s—and his intuition’s—favor.

Let’s take a step back: in 2016, Berkshire Hathaway bought 100% of Precision Castparts for $235 per share. The total cost, including debt, was $37.2 billion. The group—which Buffett considered, and still considers, an outstanding company with excellent prospects—would soon be affected by the major crisis in the sector caused by the COVID pandemic. In 2020, Berkshire wrote down the goodwill on its balance sheet. Warren Buffett admitted—something he rarely does—that he had overpaid for it.

Now, however, it is a highly valuable company

From a loss of nearly $10 billion to a 100% gain, even if over 10 years. The company returned to newspaper front pages following the acquisition of a direct competitor, Consolidated Precision Products, by GE Aerospace, which paid $11.75 billion for the whole business. What is interesting is the revenue multiple paid by GE.

If the same multiple were applied to PCC, Warren Buffett’s company, the valuation would be around $100 billion. Some, however—as at Barron’s—prefer to stick to more attainable figures and therefore value PCC at between $60 billion and $75 billion.

That means moving from a substantial loss to a gain of approximately 100% over 10 years, or 6.6% annually, compounded. It is not exactly the greatest investment ever—far from it—but it confirms that some of Warren Buffett’s insights were sound. It also shows that even with sound insights, and even when the markets eventually prove us right, it is still possible to make poor investments. Or at least investments that are less compelling than the figures might suggest.

One of Warren Buffett’s fundamental concepts: the moat

Or the moat, as Americans call it. This concept concerns companies operating in markets that are difficult to attack, whether because of enormous entry costs, know-how that is not easily replicated, or legal barriers.

PCC had that kind of moat and—even though Warren Buffett admitted that he had misjudged the valuation—it ultimately paid off.

Of course, Warren Buffett also received help from his, at times incredible, good fortune. The components made by PCC are in very high demand because they are used in the AI sector, albeit indirectly. The company produces essential components for the gas turbines that generate the power used by data centers. It is growth that even an astute and visionary investor such as Warren Buffett could never have imagined.