Charles Thomas Munger, or Charlie Munger, born in 1924 in the town of Omaha, is a prominent American investor and philanthropist. His figure is known for being vice president of the Berkshire Hathaway company. In addition, he is a friend of the famous American investor and businessman Warren Buffett.
Although he takes a backseat to his friend Warren Buffett, Munger is a respected investor. Thus, his guidance greatly influenced Warren Buffett’s investment style.
Charlie Munger’s origins in the world of investments
Born in 1924, he studied Mathematics at the University of Michigan and after his military service he entered the prestigious Harvard University to study law.
After completing his law studies, Munger moved to Pasadena, where, in 1962, he created a law firm specializing in real estate.
Although Munger is considered a successful man in business, his first business venture was not very successful. His transformer company was close to bankrupting him, although, thanks to Munger’s vision, they managed to recover the invested capital.
In the field of real estate, together with Otis Booth, he achieved a profit of 400%, which, after a few years, allowed him to pocket his first million dollars. However, the real estate development business was not enough for Munger, so he created his own investment company (1962-1975), obtaining more than remarkable returns of approximately 20%.
Talking about Charlie Munger means talking about value investing. However, his vision of investments shows certain differences with Warren Buffett.
Munger greatly influenced Buffett when he convinced him to find interesting companies at good prices.
In other words, Munger favors finding companies that can hold their own and offer substantial growth prospects.
On the other hand, Munger has also been highly critical of diversification strategies. Munger believes that if there is too much diversification in an investment portfolio, returns can suffer. Hence, Wesco Financial Corporation, a financial company that he chaired, had an investment portfolio with shares of only four companies.
Another concept that Munger has introduced to the investment field is “elemental worldly wisdom.” This concept implies honesty and ethics in investing and addresses how problems can be reduced. And it is that, for Munger, ethics in business is essential because, in his opinion, deceit leads to failure.
Munger also coined the so-called Lollapalooza effect. This concept implies that, on many occasions, investors, guided by the crowd, as if they were a herd, act in an irrational and harmful way.
For Munger, a very important thing to keep in mind in the area of investing is knowing when to withdraw. Munger points out that he acquired this ability by playing cards. Moreover, thanks to this, Munger has accumulated one of the largest fortunes in the world.
Regarding cryptocurrencies, Munger has been very critical, even referring to bitcoin as “poison”. Thus, Munger sees cryptocurrencies as a speculative product and, therefore, can wreak havoc on the market.
Most notable investments
Charlie Munger came to preside over the financial company Wesco Financial Corporation, which is currently integrating the business conglomerate Berkshire Hathaway.
Wesco’s investment portfolio included companies such as Coca-Cola, Procter & Gamble, Wells Fargo, Kraft, Goldman Sachs and US Bancorp.
He has not only been in charge of financial companies, because Munger owns the Daily Journal, a large American publisher that also operates in the technology sector through Journal Technologies. Like Munger’s own investment portfolio, the Daily Journal’s investments are highly concentrated.
To understand Charlie Munger’s investing style, take a look at the investment portfolio he and his friend Warren Buffett hold through Berkshire Hathaway.
Both partners, knowing the banking sector well, own shares in banking entities such as Wells Fargo, Bank of America and US Bancorp. Another company in which they have maintained a significant investment is South Korea’s POSCO, a steel mining giant.
Despite being an investment genius and amassing one of the largest fortunes in the world, Charlie Munger is also a noted philanthropist. In fact, Munger has made significant donations to various American universities.