‘I was always so proud of it’: Charlie Munger had a ready reply when asked to name the investment he liked most
To say Charlie Munger lived a long, full and rich life is putting it both mildly and literally.
The Berkshire Hathaway sidekick of billionaire Warren Buffett died in November just weeks short of his 100th birthday. His estimated net worth? A mere $2.2 billion, according to Forbes.
Don’t miss
These 5 magic money moves will boost you up America’s net worth ladder in 2024 — and you can complete each step within minutes. Here’s how
‘It’s not taxed at all’: Warren Buffett shares the ‘best investment’ you can make when battling rising costs — take advantage today
Indeed, Munger was an investing legend — and just as much a font of no-nonsense wisdom and wit. Regarding the extravagant purchases consumers love, he once quipped, “Who in the hell needs a Rolex watch?”
As investors, we arguably need to measure time in a different kind of way: that is, ticking off the moments until we trade big-ticket spending for even an ounce of Munger’s golden investment guidance.
In one video capturing Munger’s remarks from the 2022 Daily Journal ($DJCO) Annual Meeting, he shares the story of a big win … and the following year, a bad flop.
Munger’s best investment ever
Munger’s musings on the extremes of his financial life were sparked by a certain Wes in Miami, who asked him, “In your storied investment career, which investment did you like the most?”
“Well, that’s rather interesting,” Munger replied, his trusty Diet Coke can sitting in front of him. He mentioned the World Book Encyclopedia, which he remembered from his youth as a product sold door to door. “It was easy for a child who wasn’t necessarily a brilliant student.”
And as an investment, the World Book provided volume after volume of wealth. ”Berkshire made $50 million pre-tax per year out of that business for years and years and years. I was always so proud of it because I grew up with it and it helped me.”
The World Book triumph follows a pattern of Buffett and Munger buying into successful businesses whose products they loved, including Dairy Queen, See’s Candies, and yes, Coca-Cola.
Berkshire Hathaway also followed a model that almost seems old fashioned today: it invested in companies whose stocks were undervalued; that is, when the intrinsic value per share dips below the current market share price.
Read more: Suze Orman says Americans are poorer than they think — but having a dream retirement is so much easier when you know these 3 simple money moves
World Book only ceased to return monstrous profits when, as Munger noted, “a man named Bill Gates came along and decided he was going to give away a free encyclopedia with every damn bit of software.”
The World Book success story boils down to the kind of simple principle Munger loved so much: buy in companies whose products and profit potential you believe in, especially after you study the numbers and marketplace dominance.
“It’s still a marvelous product,” Munger said, “and it wasn’t good that we lost what World Book was doing for this civilization. World Book helped me get ahead in life.”
Charlie’s folly
But even the most successful market gurus have their crash-and-burn moments. Munger had no trouble recalling the dud that haunted him at the Daily Journal’s 2023 meeting: Alibaba “was one of the worst mistakes I’ve ever made.”
Munger said he was “over-charmed” by online retailing and “got a little out of focus” when it came time to invest his money in Alibaba. In fact, Munger acknowledged that he used leverage to buy the stock— a tactic he has frowned on in the past — because “the opportunities were so ridiculously good I thought it was desirable to do that.”
Munger initially bought about 165,000 Alibaba shares in the first quarter of 2021 and increased that to 602,060 shares in the fourth quarter. But he then cut that back to 300,000 shares in the first quarter of 2022.
The lesson Munger learned and that we can especially benefit from today is that the market’s bright shiny objects may distract us from doing our homework. E-commerce, he said, wasn’t a slam dunk but just another form of retail where a business has to prove its viability, just like a brick-and-mortar store.
This story should be familiar to anyone who has jumped on an IPO from a much-hyped company, only to see its stock falter days afterward. Trump Media, for example, recently dropped below $30 a share, compared to an IPO price that soared above $70.
As for his particular market tumble, Munger’s response was pure Munger: “I keep rubbing my own nose in my own mistakes like I’m doing now because I think it’s good for [me].”
What to read next
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
