Charlie started by defending Berkshire’s participation in the Burger King purchase of Tim Hortons “the bigger company should get the headquarters,” and that since Tim Hortons has more revenue “anyone who thinks the deal is motivated purely by tax considerations is “stark raving mad.”
Asked what lead him to buy of Wells Fargo & Co. for Daily Journal in 2009,
“It was too cheap, and we had the money!”
Talk about patience, Charlie had been building cash at the Daily Journal since 2002 then used all the accumulated funds to purchase 1.6 million shares of the bank one day before the stock hit its low for the year.
“You can say I was a little lucky,” he added.
Charlie also predicted that within a few years Berkshire “will be the biggest utilities business in the United States.” This is interesting in view of the fact that Berkshire Energy which is currently generating revenue at the rate of about $16 billion. Will have to add about $9 billion in annual revenue to beat out Duke Energy so don’t be surprised if we see some acquisitions in near future.
On the subject of his personal investments Charlie says he holds three positions, Wells Fargo, Costco and an “Asian Fund”. I suspect the Asian Fund is a portfolio managed by Li Lu the young man from China who is Charlie friend and that recommended the Berkshire purchase of BYD.
“I must not know what the hell I am doing with only three holdings, but I am right and they’re wrong. If someone is shrewd enough, 3 holdings held in perpetuity are more than enough security. I never had any interest in all this crazy merry-go-round – all my holdings are at all-time highs each day – am I doing it wrong?”
Most investors give their money to mutual funds or multi-billion dollar investment management companies who are so large they have no choice but to become closet indexers.
“Why in the world should people pay a lot for being told to divide their investments in 200 pieces? It is weird. There is more dementia about finance than about sex.”
As good example of kind of thing that Charlie will say to this small group of what he considers Berkshire groupies that he will not say in front of 40,000 people at the Berkshire meeting. He talked about benefiting from the irrationality endemic to the financial markets; (see how Charlie is getting humble as he gets older)
“If the rest of world wasn’t so stupid, none of us would be rich – some people who see stupidity want to keep the benefits, but eliminate stupidity and can’t – This room is filled with people whose comfort has come from the stupidity of other people.” This sounds a little callus until you consider the stupidity Charlie is talking about is coming from hedge fund Masters of the universe, MBA graduates and Wall Street in general
In an interview after the with the Wall Street journal’s Jason Zweig after the meeting Munger made a comment that I have not heard him make in public before, and which flies in the face of some of the basic value investing wisdom.
“I don’t love Ben Graham and his ideas the way Warren does. You have to understand, to Warren — I have to say, Ben Graham had a lot to learn as an investor. His ideas of how to value companies were all shaped by how the Great Crash and the Depression almost destroyed him, and he was always a little afraid of what the market can do. It left him with an aftermath of fear for the rest of his life, and all his methods were designed to keep that at bay.
I think Ben Graham wasn’t nearly as good an investor as Warren Buffett is, or even as good as I am. Buying those cheap, cigar-butt stocks [companies with limited potential growth selling at a fraction of what they would be worth in a takeover or liquidation] was a snare and a delusion, and it would never work with the kinds of sums of money we have. You can’t do it with billions of dollars or even many millions of dollars.”