Charlie Munger, a legend in the investment world, speaks.our today’s call Coming from the billionaire vice chairman of Berkshire Hathaway BRK
BRK,
People who provided investment insights Via Acquired Podcast While having dinner at my home in Los Angeles. The interview was published on October 29th.
Warren Buffett’s right-hand man talked about bets on stocks such as Costco, Apple and Japanese trading companies, and admitted that finding good investments can be tough. “In the early days of our work there were a lot of low-hanging fruit, but now there are no low-hanging fruit,” he said.
Later, when asked how Berkshire chose Apple AAPL, its largest holding, he reiterated that view, saying, “It’s not that there’s no more low-hanging fruit for fools, but it’s very It’s small,” he said.,
Back in 2016.
“Everyone needs some kind of significant participation in the 12 companies that are doing better than the others, and you need at least two or three of them. If you have that mindset, Apple should be on the list. “He’s an obvious candidate to join,” he said.
And how did they choose the iPhone maker among the Big Tech companies? “We couldn’t find anything else. It was cheaper – the revenue was 10 times higher.”
Munger was asked why he thought all the big tech companies were dominant – Apple, Microsoft MSFT,
Tesla TSLA,
Alphabet GOOG
etc. — I became very focused on markets, pensions, and 401k plans. “It was a natural thing…That’s what human nature and competition causes…When you end up making everyone stupid because of this insanity of venture capital, that’s the natural outcome.”
And when asked for advice on finding those good bets, he replied: “Once you know you have an advantage, you should bet big.”
Mr. Munger commented on Costco’s costs.,
Berkshire sold it in 2020, but the billionaire still owns it. he says he’ll never sell.
“Well, they really were selling it cheaper than anywhere else in America, and they were doing it in big, efficient stores…The parking spaces were 10 feet wide instead of the usual 8 feet, etc.…They… We were keeping all the people out of the store who weren’t.” Don’t do a ton of work. We also have a special bonus for those who visit the store: reward points. Everything went well,” he says.
He said Walmart WMT.
The company has made some big mistakes over the years against Costco, mostly because it’s “too caught up in the ideas it already has” and not open to new ideas. Wal-Mart has settled into a formula of expanding into small towns where real estate values are not very high and lowering occupancy costs.
“So having to pay for good locations as opposed to wealthy suburbs pissed them off, and Costco just specialized in good locations where the rich lived. And Walmart just let them do it every year. And that was a terrible mistake,” he said. Munger added that while it might work to like Costco and buy at current prices for the next 10 years, “it’s getting difficult.”
He was also asked whether the disruption has made it more possible to invest in the auto industry and electric vehicles. “Probably one or two electric cars.” [makers] They’re really good at it, but certainly no one else is. It’s too tough,” he said.
Munger praises Chinese EV maker BYD CN:002594,
Berkshire calls this “a miracle, but the man works 70 hours a week and has a very high IQ.” He can do things you can’t, look at other people’s car parts and figure out how to make that… thing. You can’t do that. ” He doesn’t name names, but we think he’s talking about: Mr. Wang Chuanfu, BYD’s extremely poor company chairman.
Munger also spoke about his distaste for so-called “style companies” like Nike NKE.,
Although he praised luxury manufacturers like Hermès FR:RMS,,
He added: “If you offered Hermès at a low enough price, I would buy it.” The reason these types of companies can survive, he says, is “because they have a brand that people really trust.”
He also touched on Berkshire’s much-discussed investment in five Japanese trading companies, Mitsubishi JP:8058.,
Mitsui JP:8031,
ITOCHU Corporation:8001,
Marubeni JP:8002
and Sumitomo JP:8053.
This summer, Berkshire upped the ante even further.
Munger said the investment was “a no-brainer.” If you’re as smart as Warren Buffett, you probably come up with such an idea two or three times every 100 years. The interest rate in Japan was 0.5% per year for 10 years, and these trading companies were really solid old companies. So he could borrow all the money for 10 years and buy a stock, which he paid a 5% dividend. A huge amount of cash flows without any investment or thought. How often do you do that?
But he added that growing those stocks was difficult and Berkshire “had to be very patient and pick it up a little at a time.” It took forever to raise $10 billion in investment, but it was just like God opened a box and poured money into it. It was very easy to get money. ”
Munger also valued his bitter taste in venture capital, as some deals are “so topical and have to be decided so quickly,” that these days it’s akin to “gambling.” said. He also said that many venture capitalists these days make money by “cheating” investors.
He briefly mentioned China, saying its economy “has better prospects than almost any other large economy for the next 20 years.” First, the big Chinese companies are stronger, better, and cheaper than any other company. ” he added.
However, for Asian companies, TSMC TW:2330
The prominent investor said the company is not an investor he would want to own because it doesn’t really have a “unique brand” like Apple.Listen to the entire podcast here.
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Stock futures ES00
Government bond yields are showing an increase
The dollar depreciates.Bank of Japan announces that it will maintain 10-year government bond yields
0%, but we plan to make it more flexible. Crude oil price CL
BRN00
It is rising slowly.
read: Global central banks’ gold purchases hit record high in first nine months of this year
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caterpillar CAT
The stock price has been rising due to the large increase in profits as the price increase has contributed to the increase in sales. jet blue JBLU
Shares are falling after the low-cost airline reported missed third-quarter results and warned of bigger losses ahead. Amgen AMGN
Anheuser-Busch BUD outperforms earnings, but
The gains were driven by slightly improved profits and a new $1 billion share buyback plan.First solar FSLR results,
Paycom PAYC
and Caesars Entertainment CZR
After closing.
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Shares rose 17% as the social media company beat expectations with soaring sales and profits.
Silicon Carbide Wolfspeed WOLF
It is up 14% after forecasting a narrower-than-expected loss. Lattice Semiconductor LSCC
Shares fell 15% due to weaker sales forecasts. Look out for the next chip biggie, AMD AMD
I will report after the market closes.
Apple AAPL ahead of financial results later this week
Debuts new processor and MacBook Pro.
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A decade of outperformance in U.S. stocks may have reached its limit, the Goldman Sachs team said. Peter Oppenheimer, chief global equity strategist, said Wall Street stocks have “historically underperformed over long periods of time” and could see a decline in performance over the next 10 years. .
Oppenheimer acknowledges that “the U.S. remains at the forefront of technological innovation,” but the market is highly concentrated in a few large companies, and that “in the current high interest rate environment, it is competing with other asset classes.” “Increasing competition could deter American households from adding to their existing assets.” has a high level of equity ownership,” the Goldman note said.
Here is the chart provided by Goldman:
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