An investment legend died last week at the age of 99. He would have been 100 years old on January 1st. Many of you will not recognise his name or even that of his 93 year old investment partner – Warren Buffett.
Together they have built the largest conglomerate in the would, currently valued at $780 billion. A conglomerate is a company that owns other companies across diverse sectors from running shoes to railroads. If Berkshire Hathaway was a fund it would be 4 times larger than the next largest actively managed fund in the US.
Why is his death important?
We all own some shares in Berkshire Hathaway. There is no concern that the outstanding growth that has been achieved by BH in the past will suddenly stop. We will continue to hold Berkshire Hathaway across our managed portfolios. The succession plans within BH have been in place for over a decade with much of the day to day decision making having been delegated to other long-standing senior directors.
Berkshire Hathaway
An Inspiration
Throughout my modest career I have taken inspiration from both Charlie’s and Warren’s books and appearances. They are famous for their investment words of wisdom. Here are some of them.
‘A lot of people think that if they have a hundred stocks they’re investing more professionally than they are if they have four or five. I regard this as insanity.’
“I think it’s much easier to find five than it is to find 100. By the way, I call it ‘diworsification,’ which I copied from somebody. And I’m way more comfortable owning two or three stocks, which I think I know something about and where I think I have an advantage.”
“Well, I can’t give you a formulaic approach because I don’t use one. If you want a formula, you should go back to graduate school. They’ll give you lots of formulas that won’t work.”
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”
Charlie Munger“Knowing what you don’t know is more useful than being brilliant.”
“In my whole life , I have known no wise people who didn’t read all the time – none … ZERO”.
“Three rules for a career: 1) Don’t sell anything you wouldn’t buy yourself; 2) Don’t work for anyone you don’t respect and admire; and 3) Work only with people you enjoy.”
“The big money is not in the buying and selling… but the waiting.”
There are many, many more pearls of wisdom from Charlie should you wish to do a quick internet search. I hope you can see from the small selection chosen above, the influence legendary investors like Charlie and Warren have had on us.
Merry Christmas, Howard and team. I have to say I’d never heard of Charlie but was well aware of Warren Buffet. The quotes smack of an eminently sensible point of view. Obviously they applied that wisdom to their dealings.
Merry Christmas!
In this new “groupthink” world, there is no substitute for experience I think. I sometimes wonder what the younger generation is thinking.
Did he ever express a view regarding gold as a haven of safety?
Hi Dick
Thanks for the question which I’m sure will be of interest to other clients. Here’s what he said about gold.
Charlie Munger had this advice for investors: don’t buy bitcoin or gold.
“I don’t think bitcoin is going to end up the medium of exchange for the world. It’s too volatile to serve well as a medium of exchange. And it’s really kind of an artificial substitute for gold. And since I never buy any gold, I never buy any bitcoin, and I recommend other people follow my practice,” Munger said during an interview at the Daily Journal’s annual shareholder’s meeting.“
The thing that holds back gold is a strong dollar and the fact it pays no interest. An owner of gold is banking on the hope of capital appreciation. Last week there was a flurry that took the gold price well through $2000 but it was a very short term spike. The 3 year trading range continues. You can see the chart here.
https://finance.yahoo.com/quote/GC=F?p=GC=F
Instead BH have over $160 billion in cash. I guess you can see why we are so cash heavy currently. 4.85% gross – no currency risk (all gold investments are priced in dollars) full liquidity, ready to deploy now interest rates seem to have peaked.