Charlie Munger – A Lifetime of Valuable Lessons
Most of us have likely hear the news that Charlie Munger, Vice Chairman of Berkshire Hathaway and partner to Warren Buffet for the past several decades passed away yesterday at the age of 99. Munger would have been 100 years old on January 1, 2024. Berkshire, originally a textile manufacturing firm, was transformed under the leadership of Buffett, one of the most successful investors of all time. Since Buffett took control in the mid-1960s and joined by Munger during the latter part of the 1970s, the stock of the company has shown a remarkable track record, significantly outperforming the S&P 500, a benchmark index representing larger publicly traded stocks domiciled in the United States.
The investment philosophy of Berkshire Hathaway, which focuses on buying high-quality companies at reasonable prices, has paid off handsomely. Berkshire Hathaway’s portfolio consists of a diverse range of businesses, including insurance, energy, transportation, and consumer products. This has helped it weather economic downturns more effectively than many other companies.
Although regarded as one of the best investors ever, Buffett, Munger et al have been under some criticism over the past few years as some have questioned Berkshire’s value-oriented approach as the economy transitions to one that relies more on technology and services rather than manufacturing. Perhaps as a result, Berkshire has returned 68.27% to its shareholders over the past five years as compared to the S&P 500’s 80.86%. But let’s extend the performance to include a longer period of time.
As you can see from the chart below, Berkshire Hathaway’s investment strategy has been quite successful over the long haul. In fact, over the past 30 years, Berkshire Hathaway is up over 3,000%, nearly double the return of the S&P 500.
The conclusion that one can draw from the performance of the stock of Berkshire Hathaway is that periodically an investment approach (style) can go in and out of favor. However, if that analysis is well-founded and if you have the discipline to adhere to it over the peaks and through the valleys, your probability of success increases. Berkshire Hathaway tends to invest in companies with wide moats (competitive advantages), strong management teams, and those that produce consistent earnings. This has set them apart from many others. As Charlie Munger said “I think that a life properly lived is just learn, learn all the time” which is fundamental to a successful investor but also to a well-rounded person. It is something we aspire to as well.
“This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.
Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”
