Warren Buffett’s most famous rule of investing is summed up as, Don’t lose money. But he shared another rule that you may have missed last year in Berkshire Hathaway’s annual report. “Find a very smart high-grade partner—preferably slightly older than you—and then listen very carefully to what he says.”

For Buffett, that partner was ­Charlie Munger, vice chairman of Berkshire Hathaway, who died in November 2023, just short of his 100th birthday. Munger was pivotal in shaping the investment philosophy and decision-making process at the struggling New England textile company that became one of the world’s largest and most successful conglomerates.

Without Munger’s counsel over more than a half-century, Buffett likely would never have become the GOAT (­greatest of all time) among global investors or amassed a net worth of $120 billion. Before Munger, Buffett invested in troubled companies selling at deep discounts, hoping to squeeze profits out of them. He referred to them as “cigar butts” that had one good puff left. Munger taught ­Buffett that it was more lucrative to pay a fair price for a great company with decades of growth ahead of it.

A multibillionaire in his own right, Charlie Munger met weekly with chief executives, government officials, venture capitalists and investment managers drawn to his expertise, wisdom and self-­deprecating sense of humor. “If people weren’t so often wrong,” Munger used to say, “[Warren and I] wouldn’t be so rich.”

Bottom Line Personal asked four top investment professionals what they learned from Charlie Munger…

Steven Check

Check Capital Management

Munger Lesson: When you get a lolla-palooza, for God’s sake, don’t hang by like a timid little rabbit. I had been watching Charlie Munger at annual corporate meetings for more than three decades. What amazed me was how infrequently he invested. Years would go by without him making a significant stock purchase. He kept waiting for a spectacular opportunity where the investing odds were heavily in his favor…and, when they came along, Charlie bet big. He never regretted the bad investments—only the good ones that he should have made but didn’t. Example: Twenty years ago, Munger and Buffett were using a young Internet company called Google to advertise their insurance businesses online. They witnessed firsthand how lucrative search engine optimization was going to be—but they didn’t buy the stock “We just sat there sucking our thumbs. We screwed up,” Munger lamented at a Berkshire Hathaway meeting. “We’re still trying to atone. Maybe Apple was [our] atonement,” Munger added, referring to their investment in the iPhone maker, one of their biggest winners ever.

To use this lesson: Over a lifetime of searching, most investors will be lucky to get a handful of golden mispriced opportunities. If you have done your homework and have great confidence that the rewards greatly outweigh the risks, find the courage and vision to not procrastinate or invest timidly. This happened to me in the 2007–2009 bear market. Berkshire Hathaway stock had lost more than half its value, the worst drop in the company’s history. It made no sense. The company was highly profitable, had a fortress-like balance sheet and would continue to compound earnings year after year. Coincidentally, options started trading on Berkshire’s stock in 2009. I saw this as one of those lifetime opportunities, so I invested most of my money in what I felt was an intelligent Berkshire options strategy. Result: An investment program that Check Capital now calls its Private Program, which has had an annualized 22% return over the past 14 years.

Steven Check is president and chief investment officer of Check Capital Management, which has $1.8 billion in assets under management, Costa Mesa, California. He is editor of the Blue-Chip Investor newsletter. CheckCapital.com

Bob Carlson,

CPA Ritholtz Wealth Management

Munger Lesson: Temperament is as important as intelligence for an ­investor. Early in my career, I felt pressure to be a great stock picker. Then my dad handed me Poor Charlie’s Almanack, a collection of Charlie Munger’s writings. Much of it focused on the value of self-awareness, why people are so psychologically flawed and how that leads to decision-making mistakes. It hadn’t occurred to me that investing is about more than being smart. It is about understanding your disposition’s limits. Example: Munger was able to strip the emotion out of investing. He could hold a concentrated stock portfolio worth billions of dollars and watch it drop 50% and still sleep well. I wasn’t wired that way. I was drawn to automated buy-and-hold index investing, not trying to beat the markets’ returns and not making bad decisions in the heat of the battle.

To use this lesson: You don’t need a great investment strategy. You need to find a good strategy you can stick with through ups and downs, even if it means holding more cash or bonds. Investors tend to fool themselves about how much loss will cause them to capitulate and sell a stock. In my experience, most people can deal with a 10% correction, but once they hit the 20% level, they panic and struggle to hang on. By 40%, it’s typically, I don’t care. Get me out now!

Ben Carlson, CFA, is director of institutional management at Ritholtz Wealth Management, which oversees $3.7 billion in assets, New York City. He is cohost of the financial podcast Animal Spirits. RitholtzWealth.com

Bill Stone, CFA

The Glenview Trust Company

Munger Lesson: All I want to know is where I’m going to die, so I’ll never go there. This was Munger’s way of illustrating one of his favorite skills—the power of inversion. When you are struggling with an investment decision, consider the opposite of what you want to happen. That allows you to plan to prevent failure. Example: Munger once gave a speech at his son’s high school about how to have a happy life. He told the group he had no idea what would bring them happiness, but, summarizing Johnny Carson, a good start was to list all the factors guaranteed to cause misery and strive to avoid them.

How you can use this lesson: I learned this mental skill in the 1990s. I was working as a financial analyst at ­Salomon Brothers when Buffett and Munger had to step in to save the company. This skill is invaluable whenever I’m considering a new investment. Example: Say an artificial intelligence (AI) stock catches my eye. I don’t dwell on why I should buy it because I already have a bias toward owning it. I make a strong case for not buying it (it is overvalued…the company isn’t profitable and faces strong competition). If the investment idea refuses to die, then it may be something worth considering.

Bill Stone, CFA, is chief investment officer of The Glenview Trust Company with $20 billion in assets under management, Louisville, Kentucky. GlenviewTrust.com

Frank E. Holmes

US Global Investors

Munger Lesson: Great management matters. Munger liked to quip that the secret to success for a big conglomerate was acquiring businesses run by executives who don’t “require much managerial talent [here] at headquarters.” He had a knack for hiring legendary CEOs such as Ajit Jain (Berkshire Hathaway Reinsurance Group), Greg Abel (Berkshire Hathaway Energy), Troy Bader (Dairy Queen) and Rose Blumkin (Nebraska Furniture Mart).

To use this lesson: When you invest in a company, you’re betting on the jockey, not just the horse. Read the annual reports and everything you can about the CEO. He/she should have a deep knowledge of the industry…communicate candidly when the business has setbacks…and take actions that are in the shareholders’ best interests. The most lucrative investments of my career came about because of innovation and long-term vision from the CEOs.

Frank E. Holmes is CEO and CIO of US Global Investors, an investment firm that oversees more than $4 billion in assets, San Antonio. USFunds.com

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