Warren Buffett Didn't Buy-and-Hold These 3 Stocks, and It's Cost Him More Than $12 Billion

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Warren Buffett is arguably the greatest investor of our generation. Since the 1950s, Buffett has managed to turn less than $10,000 into nearly $74 billion. In fact, he'd probably be worth $100 billion, if not more, had he not been so philanthropic over the past decade and given away $27.5 billion of his wealth to various charities. 

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What makes Buffett's investment strategy so unique is that it's really simple: buy great companies that have clear competitive advantages, and hold them for a very long period of time. For instance, Buffett's Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) has been holding shares of both Wells Fargo and Coca-Cola since the late 1980s. These are brands that have global appeal, and they can succeed regardless of who is running the company, which is how Buffett likes things.

Generally, Buffett doesn't deviate from this long-term buy-and-hold strategy -- and why would he given that high-quality companies tend to increase in value over the long term. But the few times he has held companies for shorter periods of time, it's cost him dearly. Here are three companies Berkshire Hathaway purchased that were sold far too early, costing the Oracle of Omaha more than $12 billion in would-be capital gains and dividend income in the process.

Lowe's

In the fourth quarter of 2010, shortly after the housing industry hit its trough, and a little more than a year after the stock market found its bottom, Buffett's Berkshire Hathaway headed for the exit with its 6.5 million shares of do-it-yourself retailer Lowe's (NYSE: LOW) stock in tow Considering the high unemployment rate at the time and the unknowns concerning the subprime market, Buffett and his team had to believe that housing was in for a steeper correction. Also, with Lowe's being more reliant on appliances than its do-it-yourself rivals, it appeared to be more susceptible to downside pressure.

However, when Buffett wound up selling its stake in Lowe's, it netted only in the neighborhood of $163 million (exact figures aren't known since 13F filings don't list a specific date or sale price). Today, those same 6.5 million shares in Lowe's would be worth $492 million. What's more, Buffett would also have collected $5.99 per share in aggregate dividends since he sold his stake. That's another $39 million in forgone income, for a grand total of at least $368 million in lost capital gains from not buying-and-holding this do-it-yourself giant.

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Home Depot

Believe it or not, dumping Lowe's wasn't actually Buffett's first mistake in the do-it-yourself home improvement industry. In the second quarter of 2009, Warren Buffett dumped a quarter of his 3.7 million shares of Home Depot (NYSE: HD), and jettisoned the remainder of his stake in the third quarter of 2010, the quarter preceding his disposal of Lowe's. Again, the reason for the sale appears to be the belief that housing was going to get worse before it got better, but as we now know, Buffett has been proven very wrong in this respect.

Home Depot's focus on improving the knowledge of its workers, empowering them with point-of-sale technology to improve the customer experience and expedite the sales process, and promoting its direct-to-consumer website, has allowed it to stay a step ahead of Lowe's at seemingly every turn. Today, 3.7 million shares of Home Depot would be worth about $544 million. Not to mention, Buffett has given up $12.78 per share in aggregate dividends, which would have added $47 million to Berkshire's pockets. All told, Buffett probably missed out on around $450 million in gains by selling Home Depot too soon.

Walt Disney

But the crown jewel of short-term mistakes goes to Walt Disney (NYSE: DIS), which Buffett quickly sold not once, but twice.

In 1966, Buffett wound up taking a 5% stake in Disney, which was thriving following the release of Mary Poppins, and was attracting about 9 million people annually to its theme park in Southern California. With an approximate $80 million valuation and a clean balance sheet, Buffett's investment amounted to only $4 million. Buffett believed that Disney's content vault would be a growth engine that would drive profits for him and his partnership -- and he wasn't wrong. Buffett wound up pocketing $2 million in profits, about a 50% return, just a year later.

But, and this is a doozy of a "but," had Buffett hung onto his 5% stake in Disney, it would be worth $8.32 billion today. That's a monumental goof in hindsight, and the pun is fully intended.

Then, in 1995 when Disney acquired Capital Cities/ABC in a $19 billion cash-and-stock deal, it inherited 21 million shares of Disney that it pretty quickly disposed of. At the time of the deal, these shares were worth less than $400 million. Today, 21 million shares would be worth about $2.23 billion.

And don't forget the dividends that Buffett went without due to the sale. Buffett has forgone $12.36 per share in dividends since 1989, which for his original 5% stake means a loss of $964 million in dividend income, and another $249 million for the 21 million shares disposed of post-merger. All told, Buffett missed out on at least $10.1 billion in capital gains and $1.2 billion in dividend income with Disney.

When you add these three mistakes up, Buffett's short-term mindset has cost him and investors more than $12 billion. Thankfully, Buffett has been right far more often than he's been wrong, and he's also been adept at learning from his mistakes.

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Sean Williams has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Walt Disney. The Motley Fool recommends Home Depot and Lowe's. The Motley Fool has a disclosure policy.