Buffett and Munger's Investment Wisdom

40000 people gathered at the CHI Health Center in Omaha to attend the Berkshire Hathaway Annual Shareholders’ Meeting, where they will shop, picnic, do a 5km race, and listen for hours to 93 year-old Warren Buffett and 99 year-old Charlie Munger share their collective investment wisdom and life experiences.

I am an unapologetic sycophant. I have attended eight live meetings in Omaha, but more recently I have chosen to watch the proceedings on a live stream in the comfort of my home. I must confess that I have never read a book about Buffett. Rather I have formed my knowledge and admiration from decades of reading the annual Berkshire letter and writing copious notes during the meetings’ lengthy question and answer sessions.

The pages of notes I compiled during these hours of meetings have characterised my investment approach and provided the guidance I often pass on to my younger colleagues.

When commenting on the luxury industry, my mantra “Buy the share and not the product” was motivated by Buffett’s advice to young adults entering the work force. Avoid purchasing an extravagant motor vehicle in favour of a more pragmatic, affordable model, he would suggest. Invest the price difference in the market. Over the years the savings will grow into a very tidy nest egg.

It is also Buffett who steered the youth sitting in the audience to do something they love and not to live their parents’ biography. When you love what you do there is no heavy lifting. Your best investment is in your own education. Go to bed at night with a little more knowledge than when you woke up.

What distinguishes Buffett and Munger in the savings industry is their unpretentious investment style, a style they have championed with years of high-quality returns. You don’t need an IQ of more than 120 to identify a good investment, Buffett would tell his adoring followers. There are people in the investment community with IQs of 150 who believe they must use it. They should sell the 30 points.

Their formula is to invest in businesses that shout at you – solid operations with enduring competitive advantages that build their earning power. Also, know what the business will look like in ten to fifteen years’ time. If you need a spreadsheet or computer to decide, then don’t do it. If it’s not obvious, walk away. Nor do you need to spread your investments too wide. If you have a harem of forty women, you never get to know any of them very well, Buffett jokes.

Buffett and Munger seldom discuss macro issues, preferring to spend their time examining companies than making forecasts on the economy, about which they admit knowing very little. Monitoring the Federal Reserve, they reckon, is like watching a good movie where you don’t know the ending.

Since its formation more than fifty years ago, Berkshire Hathaway has set a high standard of stewardship that Buffett and Munger expect the businesses in which they invest to follow. They do not need to tick the boxes on an ESG spreadsheet.

The pair are hugely patriotic and believe strongly in the opportunities the US has to offer. Yet, they sidestep commenting on politics – Buffett is a Democrat, Munger a Republican. Still, knowing their commitment to ethical behaviour, if asked to comment on former President Trump’s catalogue of legal woes, including allegations of rape and paying off a former porn star, Buffett would probably shake his head and say, the question is not whether Trump is guilty or not, it is why he is linked to these claims in the first place.