Buffett’s painful Dexter Shoes buy later looks like a bargain for Berkshire

Warren Buffett has faced plenty of well-known misses and hits during his long tenure at Berkshire Hathaway, but one acquisition has sometimes been singled out as particularly difficult to justify in hindsight. A Yahoo Finance report revisits Berkshire’s $433 million purchase of Dexter Shoes, describing it as Buffett’s “worst-ever deal,” at least on paper when it was announced.

The report’s central point is about the mechanics of the purchase, not the footnotes. Berkshire bought Dexter Shoes by paying with Berkshire stock rather than cash, and the article argues that the shares used to fund the deal have since appreciated dramatically.

According to the Yahoo Finance analysis, the Berkshire stock that went into the Dexter Shoes purchase would today be worth about $19.3 billion, based on the stock’s subsequent performance. In that framing, what initially looked like a flawed trade turned into a windfall once the value of the consideration used in the transaction rose over time.

The article also connects the “worst-ever” label to a second element: how Berkshire ultimately put Dexter Shoes to work inside the conglomerate. While the report’s framing is that the deal started poorly, it characterizes the outcome as useful for the company’s broader corporate strategy, suggesting Berkshire did not simply acquire a business and then discard it.

Berkshire Hathaway, led by Buffett, has long built its approach on a mix of wholly owned operating companies, insurance underwriting, and a portfolio of public investments. In that context, acquisitions financed with Berkshire shares can matter because the conglomerate’s valuation and flexibility are intertwined. Paying with stock can be attractive if management believes the shares are reasonably priced relative to the targets being acquired, but it can also make investors second-guess the deal if the shares later run up.

The Dexter Shoes deal has served as a kind of case study for that tension. In the Yahoo Finance retelling, the company’s choice to use Berkshire equity rather than cash becomes the defining feature, because the later appreciation of Berkshire’s stock magnifies the apparent cost of the acquisition when viewed from the original “worst-ever” perspective.

Still, the details that typically help investors judge an acquisition are not fully spelled out in the Yahoo Finance report as described in the material available here. The report does not lay out, for example, the precise timeline of when Dexter Shoes was acquired relative to the stock’s subsequent changes, nor does it provide specific operational milestones at Dexter Shoes that would explain how the business contributed to Berkshire beyond the general statement that it was put to good use.

Going forward, the question for Berkshire-watchers is whether other acquisitions financed with Berkshire stock will be judged by the same hindsight lens. With Berkshire shares having been used in past transactions, investors may keep comparing deal rationales at the time of payment against the later movement of the consideration used to fund those purchases.