Charlie Munger: It's 'absolute insanity' to think owning 100 stocks instead of five makes you a better investor
Investment icon Charlie Munger, vice chairman of Berkshire Hathaway (BRK-B, BRK-A) and longtime business partner of Warren Buffett, says his way of investing "will never go out of style."
"Because value investing - as I imagine it - always wants to achieve more value than you pay for when you buy a stock, and that approach never goes out of style," Munger said at the annual general meeting of the Daily Journal Corporation on Wednesday ( DJCO), where he acts as CEO.
According to Munger, some think that value investing means chasing businesses with a lot of money but running a lousy business.
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"[I] don't define this as value investing," he added. "I think any good investment is a value investment. It's just some people looking for value in strong companies and others for value in weak companies. But every value investor is trying to get more value than he pays for."
Munger noted that in wealth management, "a lot of people think that when they have 100 stocks they are investing more professionally than when they have four or five."
“I consider this madness. Absolute madness, ”said Munger.
"I think it's a lot easier to find five than 100," argued the 97-year-old investor. "I think the people who argue for all of this diversification, by the way, I call it 'Diworsification,' which I copied from someone. And I feel a lot more comfortable owning two or three stocks that I think I do I know something and where I think I have an advantage. "
Charlie Munger, vice chairman of Berkshire Hathaway, attends Berkshire's annual general meeting in Omaha, Nebraska on May 3, 2019. (Photo by Johannes EISELE / AFP)
Later in the session, when Munger was asked how he advises universities and nonprofits on how to manage their foundations, he said that one nonprofit foundation he “had a long influence on” was a “group of hot financiers in all areas of the world Asset management “has there is” on his board. According to Munger, this institute has two assets in its foundation account - a large stake in Li Lu's limited partnership and a Vanguard index fund.
"And as a result of these two positions, we have far lower costs than anyone and we make more money than virtually anyone," he said. "You now know what I do in nonprofits. That's not the normal outcome in America, by the way. The wealth management industry is in crisis. You really need the world to stay the way it is, and it isn't absolutely right for your customers. "
The Daily Journal's shares closed 1.4% or $ 4.70 to end at $ 351 on Wednesday.
Julia La Roche is a correspondent for Yahoo Finance. Follow her on Twitter.
Read more from the Daily Journal Meeting:
Charlie Munger on Robinhood and GameStop Madness: "It's a dirty way to make money"
Munger deviates from Buffett on Wells Fargo: "Warren was disappointed"
Munger: "The world would be better off without" SPACs
"I have a bust of him": Charlie Munger on why he admires Singapore's first prime minister
Munger compares Bitcoin to what Oscar Wilde said about fox hunting
Charlie Munger Says Costco "Has One Thing Amazon Doesn't"
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