Intelligent Investing

“We think all intelligent investing is value investing,” he says. “What the hell could it be if it wasn’t value?”

Charlie Munger
Berkshire Hathaway

While Mr Buffett’s mentor, the economist Benjamin Graham, is considered the father of value investing, it is Mr Munger who is credited with helping Mr Buffett evolve beyond buying stocks for no other reason than that they were cheap.

“That worked fine in the period after the 1930s,” Mr Munger says. “I don’t think it works nearly as well now. Too many people are doing it.”

Many of Berkshire’s holdings, from longtime investments such as Coca-Cola and Wells Fargo to last year’s purchase of General Electric’s preferred shares, are blue-chip companies considered the best at what they do.

The strategy sounds simple enough, but Mr Munger says few investors practise it.

“You can’t believe the way that conventional wisdom invests money,” he explains. “They tend to rush into whatever fad has worked lately. In my opinion, a lot of them are going to get creamed.”


17th May 2009:  Today he's negative about the economy, but positive about stocks -- a bullish sign. In the late 1990s, Munger complained that he didn't see much to buy. The market quickly proved him right. But, at current market prices, Munger sees many long-term investment opportunities.

"I am willing to buy common stocks with long-term money at these prices," Munger said. "Is Coca-Cola worth what it's selling for? Yes. Is Wells Fargo? Yes." He owns both.

"If you wait until the economy is working properly to buy stocks, it's almost certainly too late," he said. "I have no feeling that just because there's more agony ahead for the economy you should wait to invest."

But you need to be selective.