Munger’s influence is high among Australian value investors

Berkshire Hathaway, the conglomerate built by Munger and Warren Buffett, announced on Wednesday morning (AEDT) that the company’s vice chairman had died in hospital just a month before his 100th birthday.

Munger, who grew up in Omaha, Nebraska, met Buffett in 1959 while the latter was practicing as a lawyer in California. They shared investment ideas and occasionally held stakes in the same companies over the next two decades.

Munger became vice-chairman of Berkshire Hathaway in 1978, and the company’s success turned him and Buffett into influential figures in the investment community – and among Australian fund managers.

“Berkshire Hathaway could not have been built to its current status without Charlie’s inspiration, wisdom and participation,” Buffett said in a statement.

Some local fund managers, like Nelson, were in the inner circle. Every Wednesday, he would check in with Nelson and seven others to share their thoughts on the markets and investing. Last week’s meeting – which they described as a breakfast club – will be Munger’s last.

Nelson’s lasting impression of Munger is of a man who read aloud and mercilessly vetted companies and individuals who didn’t meet the criteria. This process of elimination “rarely wronged him.”

The Australian investment community is rich with value investors who have been influenced by Buffett and Munger. While he influenced their investment styles, Munger’s life lessons will likely ensure that.

“When he spoke, it got people’s attention and was seen as apolitical,” said Rob Luciano, who last year merged his hedge fund VGI Partners with Regal Australian Financial Review. “It is a loss for thinkers and those who seek wisdom and self-improvement.”

Robert Luciano James Brickwood

Luciano, who previously worked at Caledonia, says Nelson’s relationship with Munger opened doors for him and other fund managers. This connected him with Munger and Buffett. “He supported those who sought wisdom – not for their own benefit, but for the benefit of others,” he said.

Munger was also comfortable speaking his mind, even if he offended someone. “He was blunt and blunt and called a spade a spade. There’s something powerful about that – especially in the current environment,” Luciano said.

And there was no bigger fan of Charlie Munger than Warren Buffett. A couple of them were partners and friends who achieved incredible returns on their investments, said those who knew them.

“Buffett is more focused. Charlie is more inquisitive,” said Caledonia’s Nelson. Munger steered Buffett away from investing in cheap puff stocks and toward sustainable quality companies and quality franchises that could increase shareholder returns for years to come.

“Munger lived a completely different life than Buffett — he said you can never look at the price of jewelry for the woman you love — but Buffett wouldn’t renovate his kitchen because of the opportunity cost of capital,” Luciano said.

Wayne Peters, who founded Peters MacGregor Capital Management and is currently in Germany, attended about two dozen Berkshire Hathaway annual meetings, including in 2000, at the height of the Dot Com boom. That year, Peters’ question prompted one of Munger’s most famous quips: “If you mix raisins with golet, you’ll still get golet.”

Buffett and Munger at Berkshire Hathaway’s last annual meeting.

Many investors will remember Munger for that wit.

Peters recalls one of his favorites – “The only thing I want to know is where I’m going to die, so I’m never going there.” “All his standard investment philosophies are there, but his life philosophies will live on for a long time and that’s what will be remembered,” he said. “He often talked about the bad side of envy and how it destroys many lives. He got over it early in life and didn’t care. He tried to avoid envy like the plague.”

Munger also talked about low expectations as a way to avoid disappointment. These philosophies enabled Munger to live a rich and fulfilling life. At almost 100 years old, he was never old. As he told anyone who would listen: “The best armor of old age is the life well spent that precedes it.”

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