Berkshire Hathaway (BRK) stock: Charlie Munger’s missed opportunities

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on Nov 29, 2023
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  • Charlie Munger, Warren Buffett’s lieutenant has died at 99.
  • He helped turn Berkshire into one of the biggest companies in the world.
  • Berkshire has missed investments in technology and crypto.

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Berkshire Hathaway (NYSE: BRK.A) stock price will be in the spotlight on Wednesday as investors reflect on the passing of Charlie Munger, the company’s vice president. The stock has done well this year but it has underperformed the S&P 500 and Nasdaq 100 indices. It has risen by 16% while the SPY and QQQ ETFs are up by 20% and 40%, respectively.

Charlie Munger’s success at Berkshire

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Charlie Munger and Warren Buffett have engineered one of the biggest success stories in the finance industry globally. They have slowly built the ninth biggest company in the world with a market cap of near $800 billion.

Berkshire Hathaway has a long track record of beating the S&P 500 index. It has annualised returns of over 20%, higher than the SPX average return of about 12%. The company has achieved this by investing in stocks and holding billions of dollars in its balance sheet. 

Berkshire owns stakes in some of the biggest companies in the United States. It is the biggest shareholder of Apple, the most valuable firm globally. It also owns companies like Occidental, Byd, Bank of America, Coca-Cola, Chevron, and Moody’s.

Its other large investments are in companies like Geico, Business Wire, Homeservices of America, Forest River, and Alleghany Corporation.

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Most importantly, the company is now earning free money, thanks to its $157 billion cash hoard. It invests these funds in short-term government bonds, which are now yielding over 4%. In the most recent quarter, its interest, dividend, and investment income jumped to $4 billion from $2.3 billion in the same quarter in 2022.

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Missed opportunities in tech and crypto

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Looking back, Warren Buffett and Charlie Munger have had many missed opportunities. By avoiding growth companies, they missed investing in quality companies like Google, Nvidia, Tesla, and Meta Platforms. Today, these companies are worth almost $2 trillion as they dominate their key industries.

Tesla has disrupted the automobile industry and is now the most valuable company in the sector. Meta Platforms and Alphabet dominate the digital advertising industry. Charlie Munger likely knew about this since he owned Daily Journal, a publishing company that owns several newspapers.

A small investment in these technology giants a few years ago would now be worth billions. For example, while Berkshire was late in investing in Apple, the investment has generated billions in stock and dividend returns over the years.

Berkshire’s investments in other technology companies has had mixed results. It was late in investing in Amazon, a company that dominates industries like shipping, e-commerce, and cloud computing. 

Berkshire Hathaway has also missed an opportunity in Bitcoin, a technology that Munger and Warren Buffett don’t understand. Bitcoin price has jumped from less than $2 in 2009 to over $38,000. It is now valued at over $740 billion.

Charlie Munger hated Bitcoin and crypto. In one of his memorable quotes of last year’s annual general meeting, Munger said:

“I’m proud of the fact that I have avoided it. It’s like some venereal disease. I just regard it as beneath contempt. Some people think it’s modernity, and they welcome a currency that’s so useful in extortions and tax evasion.”

If Berkshire Hathaway invested just $100 million in Bitcoin in January 2012 and held it, its total amount would be worth over $2.8 billion today. 

Berkshire Hathaway stock future

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Berkshire Hathaway stock

BRK chart by TradingView

Berkshire Hathaway stock price will likely react mildly to Charlie Munger’s death. For one, Warren Buffett is still, at the helm and the team has already done enough succession planning. Greg Abel will succeed Warren Buffett when he retires.

It will also have a muted impact because it is unclear whether Munger was actively running the company. While he took part in some decisions and investments, his activity has been a bit muted over the years.

Most importantly, his death will not impact the current investments in companies like Geico, Apple, Chevron, and Coca-Cola. 

What will change is Berkshire Hathaway’s annual general meeting, where Charlie Munger was a rockstar.

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