Why did Buffett sell Costco?


Editorial team Published on

Warren Buffett sold Berkshire Hathaway's entire stake in Costco (COST) in 2020 because he felt the stock's price had reached record highs and that capital could achieve better returns elsewhere.

💡 The Core Reasons

  • 📈 High Valuation: Shares traded at record highs above $350, leading Buffett to believe the price exceeded its underlying value.
  • 🔄 Portfolio Reallocation: Buffett wanted to free up liquidity and shift capital into other investments.
  • 🛒 Skepticism of Retail: Buffett has historically avoided traditional retail due to its cutthroat nature and thin profit margins, unlike his late partner Charlie Munger, who championed Costco's unique membership model.

📊 The Aftermath

  • ⚠️ Missed Gains: Exiting the stock meant missing out on over $1.5 billion in subsequent gains as Costco's stock surged.
  • ✅ Regret: Buffett later admitted during a shareholder meeting that selling the Costco stake was "probably a mistake."