Charlie Munger's Final Advice For Investors Is About Embracing Value In Unlikely Places: 'If Something Is Really Cheap, Even Though It's A Crappy Company, I'm Willing To Consider Buying It'

In one of his last public appearances, Charlie Munger discussed a range of investment topics, including his approach to value investing. 

Munger, Warren Buffett's long-time business partner who died on Nov. 28, shared his insights on the Acquired Podcast.

Known for his frank and straightforward style, Munger drew from the teachings of Benjamin Graham, the pioneer of value investing.

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“I only study two kinds of companies," Munger said on the podcast. "I’m enough of a big Ben Graham follower … so if something is really cheap, even though it’s a crappy company, I’m willing to consider buying it. For a while anyway. I do that occasionally. I’ve done it with great success a time or two, but unlike Howard Marks, I’ve only done it once or twice in my lifetime for big gains, and that’s it.”

Graham’s investment philosophy focused on identifying undervalued securities through fundamental analysis. His approach wasn’t about acquiring cheap companies; it involved understanding a company’s intrinsic value, separate from its market price. Graham emphasized thorough financial scrutiny, seeking firms with strong balance sheets, minimal debt and strong cash flows — aspects the market frequently ignores. 

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Munger, while sharing Graham’s views, also showcased his interpretation and execution of these principles.

During the podcast, Munger spoke about the value of investing in great brands, emphasizing timing and pricing. “Great brand companies, of course, are good," Munger said. "Getting the right price. The whole trick is getting them on a few rare occasions when they’re really cheap.” 

Investing in startups presents an opportunity for investors to find great companies at low prices. It resonates with Graham’s philosophy of seeking undervalued opportunities. Startups often embody this potential, as they may offer growth prospects at initial stages when their market value is not yet fully recognized.

Munger, a fan of Costco Wholesale Corp., acknowledged the challenges of buying Costco at its current price. He reiterated the importance of timing and pricing in investments. In 1997, he joined Costco’s board after Buffett declined the offer. 

Munger tried persuading Buffett to invest in Costco early on, despite Buffett’s reservations about retail investments. Munger admired Costco’s efficiency, customer-focused approach and unique business strategies, differentiating it from other retailers.

Buffett’s hesitance stemmed from his observations of the retail sector’s volatility, as seen in the decline of major players like Sears, Roebuck and Co. Munger saw Costco’s potential, noting its competitive pricing, efficient store design, ample parking and rewards for loyal customers. His perspective on Costco exemplifies his ability to identify exceptional business models and investment opportunities, even in challenging sectors like retail.

Munger’s investment successes, such as the transformation of Berkshire Hathaway Inc. into a multibillion-dollar conglomerate and his astute investment in oil royalties, which turned a $1,000 bet into over $1 million, are testaments to his skill. His advice on avoiding stupidity over seeking brilliance, and his influence on Buffett, including suggesting investments like the Chinese automobile and battery company BYD Co. Ltd., highlight his strategic acumen.

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