Charlie Munger Says This Is The 'Smartest Person' He's Ever Met — And It's Not Warren Buffett

Warren Buffett and Charlie Munger will go down in history as some of the best and brightest investors to have ever lived.

The pair transformed Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B) from a failing textile business to an acquisition giant.

Munger joined Buffett in 1978, becoming Berkshire’s vice chairman. After spending 44 professional years with the Oracle of Omaha, one would think that Munger’s first choice for the smartest person he’s ever met would be Buffett.

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Wrong. When it comes to great intellect, Munger chose the person who “never took an aptitude test where he didn't score an 800 and leave early.”

The late Henry Singleton, a brilliant engineer who co-founded and built Teledyne Technologies Incorporated TDY into one of the nation's largest and most enduring conglomerates, was Munger’s first choice.

“He was a major mathematical genius, a Putman Fellow,” Munger said of Singleton. “Even when he was an old man, he could play chess blindfolded, at just below the Grand Master level. He had an awesome intellect, well into the top 1/1,000 of one percent.”

Singleton founded the industrial conglomerate with a colleague at the age of 43, after working for other similar companies. The engineer completed 130 acquisitions in an eight-year stint, mostly using Teledyne stock as the vehicle.

Soon after, Teledyne's P/E ratio started to decline while acquisition expenditures increased. With this in mind, Singleton shifted the company's attention to boosting the margins in the companies it currently controlled.
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Through the 1980s, Teledyne saw an exceptional return on assets of 20% or higher, which generated extraordinary quantities of free cash flow that Singleton actively (and aggressively) repurchased company stock with.

“Henry was very rational. He was quite similar to Berkshire in some ways,” Munger said. “Henry never issued a stock option. He had certain commonalities with Warren that were just logical outcomes.”

Singleton became a pioneer in the use of share repurchases as a financial tactic by repurchasing a remarkable 90% of Teledyne shares over the period of 12 years. Between 1971 and 1984, Teledyne's earnings per share increased 40-fold as a result of share repurchases.

“What was interesting to me was how much smarter Warren was at investing money than Henry. Henry was born a lot smarter, but Warren had thought about investments a lot longer,” Munger said of Singleton in comparison to Buffett. “Warren just ran rings around Henry as an investor even though Henry was a genius, and Warren was a mere almost-genius.”

From the time Teledyne was founded in 1960 until 1986, Singleton served as its chairman. In 1997, he stepped down as a director, but he retained 7.2% of the shares. He died of brain cancer in Los Angeles in 1999.

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