Charlie Munger made headlines recently when news of his death broke out. The legendary investor was only one month short of his centenary.
His passing blanketed the financial world with a cloud of sorrow. Investors wondered what would happen now that one of the most influential figures in finance had passed away.
Amid his departure, our team couldn't help but reflect deeply on his life and contribution to the financial realm. After all, his teachings and those of Warren Buffet have shaped how we view finance and investing at Wealth of Geeks. Like many other investors, we tend to regard their financial decisions as sort of a blueprint to go by in many ways.
So, as true financial devotees, we couldn’t help but seek to answer some of the most pressing questions about Munger's legacy, background, portfolio, and investment philosophy.
Who Is Charlie Munger?
Munger was many things in his life. He was a lawyer, a billionaire investor, a philanthropist, the Vice Chairman of Berkshire Hathaway, and the long-time business partner of Berkshire’s CEO—Warren Buffett.
For over 50 years, Warren and Munger built an empire valued at more than $780 billion—making it the 9th largest company in the world by market cap.
In an online statement, his close friend and billionaire Bill Gates said, “His [Munger] partnership with Warren Buffett didn’t just shape Berkshire Hathaway—it reshaped the world’s understanding of business and investing.”
But Munger’s life wasn't without challenges. Most people will be surprised to know that behind his success and humorous attitude toward life lies a man who endured tremendous struggles.
His life story is admirable, full of resilience and perseverance. Shortly after divorcing his wife, in his early 30s, he found himself financially broke and dealing with the death of his 9-year-old son—who sadly passed away from leukemia.
Most people would turn to sorrow or unhealthy coping mechanisms in these struggles. But Munger’s thick skin helped him push through. That same resilience and perseverance probably drove him forward later in life. He eventually became the legend he is today and rose to the rank of vice chairman and board member of Berkshire in 1978.
How To Invest Like Charlie Munger?
Those wishing to emulate Munger's success in the capital markets might opt to mimic his portfolio. But beyond his stock picks lies a more significant legacy—his investment philosophy. Munger’s way of thinking about these investments can help investors like you make educated decisions in the future.
So, how was Munger able to find these diamonds in the rough? And what is the real secret to his investment success?
The best way to understand this is by examining his Berkshire career. During his time there, Munger was a crucial figure in the company's success. Most importantly, he was essential in establishing an investment philosophy crucial to Berkshire’s growth.
Buffett often attributes the evolution of Berkshire's investment approach to Munger's influence. One that helped steer the company away from cheap, undervalued businesses and toward solid businesses with relatively low valuations.
But on the capital markets, these opportunities are rare. That means that employing Munger’s strategy requires firm decisiveness and a solid conviction to capitalize on them once the opportunity arises. Whenever Munger finds these rare gems, he is known to hold on to them indefinitely.
As he put it, “The Big Money Is Not In The Buying And The Selling But In The Waiting.”
The legendary investor is also notably against Bitcoin and the rest of the crypto asset class, famously saying, “Sometimes I call it crypto ‘crappo.’”
He also told the Australian Financial Review, “Anybody that sells this stuff is either delusional or evil.”
Top Charlie Munger Stocks
Curious to know which stocks made the cut and rose above Munger’s strict standards for investment? Here is a list of Charlie Munger’s top stock picks.
Berkshire Hathaway Inc Class A (NYSE: BRK.A)
At the time of his passing, Munger’s net worth was mostly allocated to Berkshire Hathaway's Class A stock. The investment magnate owned slightly over 4000 shares of the company.
Berkshire class A stock has the highest price tag on the public market, with a value of more than $546,000 per share. At the current share price of $546,000, Munger’s 4,033 shares are worth a whopping $2.2 billion. If you don’t have that kind of cash, you can still own Class B shares of the company (NYSE: BRK.B) for a more accessible entry point of $360 per share.
While Berkshire could be considered more of a slow mover when compared with companies in the tech sector, the company is generally perceived as an investment with a lower risk. Berkshire’s business is spread across so many different sectors and companies that it could be comparable to owning shares of a fund or an ETF.
Whether the company will still be the powerhouse it’s been over the past five decades remains to be seen. While having visionary leaders and critical players step down is always a just cause for worry, it doesn’t necessarily have to be detrimental to the business.
Take, for example, the case of Apple. Tim Cook, the current CEO and successor to the company’s visionary leader, Steve Jobs, has done an excellent job and is driving the business forward.
With Buffet still as the company’s CEO, it’s probable that investors will need to wait longer to find out the answer to that question. In the meantime, Berkshire could have more steam left on its engine and might be a great company to consider adding to your portfolio.
Wells Fargo & Co (NYSE: WFC)
Wells Fargo is a financial services titan that sits among the most valuable financial companies in the world. The bank boasts a market capitalization of $159 billion and more than $1.9 trillion in assets. This makes the San Francisco-headquartered bank the 4th largest in the U.S.
There are also close to 4,600 Wells Fargo branches and 12,000 ATMs across the United States. Helping the brand stand out as one of the best-known banks for in-person service.
As the 2008 financial crisis raged, Munger started buying shares in the bank. He acquired them for as low as $5 – $7 per share—an arm’s length from today’s $44 valuation.
During the last Daily Journal Corporation Annual Shareholders Meeting, Munger proudly boasted about it by saying, “Those bank stocks I bought on the bottom tick in the foreclosure crisis. It literally was the bottom tick.”
But unlike Berkshire, who also acquired shares from the bank, Munger retained his position in the company. While his position is deep in the green, the company hasn’t yielded much over the past decade. Shares of the bank now have the same valuation as they did at the end of 2013. This leaves investors with only a 2.96% dividend to look forward to.
Whether the tide will turn around for shareholders is yet to be seen. However, price action has been consolidating tightly since its March 2022 highs. This could signal that investors will soon need to decide about a new and definitive direction for the bank.
Costco (NASDAQ: COST)
Munger was deeply involved with Costco and was also a big fan of the retailer. Aside from being a large shareholder, he served as a director for the firm since 1997. Costco is the third largest retailer in the world. The discount warehouse offers an array of merchandise at significantly lower prices while operating on a membership-only model.
As high inflation continues to affect America, savvy consumers are looking for more ways to save. This could help COST shares move higher in the near term. Clues to this could already be apparent. The company has done exceptionally well as of late. Q4 2023 results saw revenue grow by 9% and earnings per share by 16%.
The company's shares are also performing exceptionally well. COST stock is nearly 5% shy of printing a new all-time high. With clear skies above its head and a solid performance in current market conditions, this Munger stock could be an excellent choice to add to your watchlist.
US Bancorp (NYSE: USB)
US Bancorp is another financial institution owned by the late Munger and one that he and Buffet share in their portfolios. The financial institution offers clients various services, including savings accounts, loans, and wealth management services.
One of USB’s most attractive offerings to investors is its 5.19% dividend. A payout that’s slightly higher than the interest rate offered by most U.S. banks and nearly in pair with most certificates of deposit (CD) available these days. While owning stock does carry more risk than your typical CD, it also offers the possibility of growth over time, which could be compelling for some investors.
US Bancorp stock, like Wells Fargo, hasn’t moved much, with shares currently sitting near their 2013 price level. But like WFC, Munger picked up USB shares at ultra-low levels during the 2008 financial crisis. Given how the tax trade-off of selling the stock compares to the almost tax-free dividend payout, it makes sense for Munger to hold the stock.
He defended his position on the banks despite slow growth during the last Daily Journal Corporation Annual Shareholders Meeting by saying, “In California, you pay huge state and federal taxes, and you sell things at a big gain.” “The dividends are almost tax-free. So based on what we would get if we sold them and the return we’re getting from the dividends, it’s not so bad for us.”
Alibaba Group Holding Ltd – ADR (NYSE: BABA)
BABA formed a significant part of Charlie’s portfolio for some time before stepping down as the chairman of Daily Journal in 2022. Shortly after his departure from the board, the publication giant halved its position with the e-commerce giant.
Shares of the company have seen better days and are now more than 75% down from their 2020 peak of $319. But the tide could be about to turn for the Chinese juggernaut.
BABA stock is nearing its all-time lows of $57 – $60, an area it has bounced from three times before and could be considered a low-risk entry for investors. If China's economic situation improves in the near term, investors could be compelled to accumulate at these levels, eventually pushing shares higher.
Bank of America Corp (NYSE: BAC)
Bank of America is a favorite that both Warren and Munger love to own. The bank is second to JP Morgan as one of the largest banks in America. The banking giant boasts a market cap of $250 billion.
The institution services the retail sector with more than 3800 branches in the United States and a few more internationally. Bank of America’s wealth management and investment arm—Merrill Lynch—manages $2.8 trillion in client assets and $3.4 trillion in Global Wealth and Investment Management.
The bank failed to make a new all-time high after the 2008 crisis but has steadily climbed. But it's not all bad news for investors regarding performance. Courageous buyers that acquired BOA shares at the bottom of the crisis, including Warren and Munger, have multiplied their original investment by almost ten times at its current valuation.
What Will Happen to Berkshire After Charlie’s Death?
The unfortunate passing of Charlie Munger is a sad tragedy that has touched those close to him as much as the global investment community. As the dust settles, some investors can’t help but wonder what the aftermath of the death of one of the most influential investment figures will look like.
One of the most pressing questions for investors is Berkshire Hathaway's succession and outlook. Munger's passing raises unavoidable questions like who will be in charge? Or how could Munger’s passing affect the overall health of the company and his business partner?
However, despite Charlie's importance to Berkshire and his relationship with Warren Buffett, his passing is unlikely to have a severe and lasting impact on the company. The conglomerate has had a succession plan in place since at least 2006. At the time, Buffett announced that the company would start preparing for his eventual departure.
Berkshire Hathaway's succession plan involves Vice Chairman Greg Abel and Ajit Jain. In the aftermath of Munger's death, Greg and Ajit are left as Warren Buffett’s top advisors.
Of course, there’s also a human side to consider as well. Munger’s passing could affect the overall sentiment of the company and Buffet. But even so, it probably would not affect their overall performance.
Are Charlie's Stocks a Good Buy Right Now?
Setting aside Berkshire Hattaway, Charlie Munger's passing will probably have little to no effect on the stocks that conform to his portfolio. Nonetheless, these companies were handpicked by one of the most influential minds in modern investment history. Considering Charlie’s long-term view of the market, they may continue to perform as he initially expected.
That being said, it’s impossible to tell whether they will still be attractive investments down the line. But as of now, they’re great candidates to add to your watchlist.
Carrying on the Legacy of Charlie Munger
Charlie Munger’s passing marks the end of an era. He will likely be remembered as an accomplished investor and a remarkable human being with a keen sense of humor. More importantly, his investment philosophy will leave a lasting legacy in the financial sphere. One that will hopefully bring prosperity to households and investors who seek to mimic his iconic investment approach.
Now that you know more about Charlie Munger and his investment philosophy, will you add one (or more) of his stock picks to your portfolio?