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Lessons from a legend: Charlie Munger’s most interesting trades

Lessons from a legend: Charlie Munger’s most interesting trades

Charlie Munger is, without a doubt, one of the most famous investors in recent history. He served as the vice-chairman of Berkshire Hathaway (NYSE: BRK.A) for half a century and was described by Warren Buffett himself as his closest associate and right-hand man.

Munger’s long career is filled with renowned investments, scrutinized moves like his involvement with Alibaba, and controversial opinions like his harsh criticism of Bitcoin. With his passing on the morning of November 28, Finbold decided to take a look at some of Munger’s most interesting trades over the years.

Oil Royalties (1962)

Charlie Munger’s oil royalties investment is interesting for several reasons. It is one of his first immensely successful decisions. In 1962, he decided to invest $1,000 – roughly $10,000 when adjusted for inflation – believing that the oil royalties were undervalued at the time.

The investment, inspired by a chance golf course meeting with one Al Marshall, proved to be hugely successful. Over the years, it netted Munger more than $1,000,000 in passive income, and his family is, to this day, receiving monthly payments amounting to $2,000 to $3,000 – all from the original $1,000.

The trade is also interesting as it technically wouldn’t be possible today. Charlie Munger used an AB Trust to provide the investment with shelter from tax, structuring it in a way that has since been outlawed.

The GEICO Investment (1976)

Considering that Martin, the GEICO Gecko, is in 2023 firmly planted in popular perception – in the U.S. and outside it – it may be hard to believe that a trade involving Geico was a high-risk investment at any point. Despite this, GEICO wasn’t always the household name it now is.

In 1976, things were significantly different. In that year, Munger convinced Buffett to invest $45 million in the car, ensuring the company despite it being close to bankruptcy. The investment is considered both a bold and a successful move, as Berkshire Hathaway ultimately made billions from it.

Warren Buffett’s company made several additional rounds of investments in GEICO in the following decades, and their success is highlighted by the fact that Geico recorded a profit of $2.3 billion in the first nine months of 2023.

See’s Candles (1972)

While both Buffett and Munger saw the potential in See’s Candles – a candy manufacturer founded in 1921 – it was Munger’s insistence that ensured Berkshire Hathaway would acquire the company. 

The key reason behind the hesitation in 1972 was that the company came with a significant premium, according to many, price tag – $25 million. The decision, however, ultimately proved lucrative as Berkshire Hathaway made more than $2 billion in profits from the investment.

While the Oracle of Omaha is generally lauded for his talent in spotting undervalued businesses, See’s Candles is generally seen as an example of Munger’s ability to find premium companies whose growth potential dwarfs their already-high valuations.

BofA and Wells Fargo

Charlie Munger’s firm, Daily Journal, holds a vast number of shares of two major American banksBank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC). The investments have, over the years, drawn significant attention due to their highlighting of recent divergences between Warren Buffett’s and Charlie Munger’s portfolios.

It is also interesting that Munger has been stubborn in holding on to the investments since 2016 in the case of BofA and since 2017 in the case of Wells Fargo. The performance of both companies has, in the period, been mixed, with the former rising just under 4% in the last 5 years and the latter dropping as much as 20% in the same period.

Such lackluster performance is notable due to its stark contrast with many of Munger’s previous investments, which have returned millions upon venturing thousands and billions for an investment of millions. Still, the ultimate strategy will remain hard to gauge as both holdings are relatively new – especially compared to things like the oil royalties – and the two investors became legends primarily due to their long-term vision.

Berkshire Hathaway

While not a trade per se, Charlie Munger’s involvement with the former textile company, Berkshire Hathaway, showcases in many ways why he attained legendary status among investors. The holding company has been wildly successful over the decades, and its shares continuously rank among the highest-valued in existence.

BRK.A all-time price chart. Source: Finbold

BRK.A’s long-term success, especially given the fact that it has failed to outperform the S&P 500 in 2023, is best illustrated by its long-term performance. It is up more than 40,000% since 1983, and its share price currently stands at a staggering $546,869.

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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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