In one of his final public discussions, Charlie Munger, Warren Buffett’s longtime business partner who passed away on Nov. 28, delved into various investment topics, shedding light on his unique approach to value investing. Munger’s insights were shared on the Acquired Podcast, showcasing his straightforward style and drawing from the teachings of value investing pioneer Benjamin Graham.
Munger, a staunch follower of Graham’s principles, revealed, “I only study two kinds of companies. I’m enough of a big Ben Graham follower… so if something is really cheap, even though it’s a crappy company, I’m willing to consider buying it. For a while anyway.” Despite the seemingly paradoxical nature of investing in low-quality companies, Munger explained that he had successfully employed this strategy once or twice in his lifetime for significant gains.
Graham’s philosophy centered on identifying undervalued securities through fundamental analysis, focusing on a company’s intrinsic value rather than its market price. Munger echoed these sentiments while emphasizing his own interpretation and application of these principles.
During the podcast, Munger highlighted the value of investing in renowned brands, underscoring the importance of timing and pricing. He emphasized, “Great brand companies, of course, are good. Getting the right price. The whole trick is getting them on a few rare occasions when they’re really cheap.”
The discussion touched upon the potential in investing in startups, aligning with Graham’s approach of seeking undervalued opportunities. Startups often represent untapped potential, offering growth prospects when their true market value is not yet fully recognized.
Munger, an admirer of Costco Wholesale Corp., acknowledged the challenges of acquiring Costco at its current price. He emphasized the significance of timing and pricing in investments, recounting his attempt to persuade Buffett to invest in Costco in 1997, despite Buffett’s reservations about the retail sector.
Munger’s ability to identify exceptional business models and investment opportunities, even in challenging sectors like retail, was evident in his support for Costco. His investment successes, including transforming Berkshire Hathaway Inc. into a multibillion-dollar conglomerate and astute investments like oil royalties turning a $1,000 bet into over $1 million, showcase his strategic acumen.
Munger’s parting advice on avoiding stupidity over seeking brilliance and his influence on Buffett, including suggesting investments like BYD Co. Ltd., a Chinese automobile and battery company, underscore his enduring impact on the world of investments.
