Charlie Munger’s Top 4 “All-In” Stocks — Munger’s Final Investments

Charlie Munger’s Top 4 “All-In” Stocks — Munger’s Final Investments

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Charlie Munger, the renowned investor, philanthropist, and business partner of Warren Buffett, left behind a legacy of wisdom that extends far beyond the realm of finance. Munger, who passed away last night at age 99, was not only a successful investor but also a deep thinker with a unique approach to life and career. That’s apparent when you look at the portfolio he passed away while holding. While most investors encourage a diversified basket of hundreds, and sometimes even thousands of stocks in the form of ETFs, Munger’s portfolio was a concentrated position in just four stocks. Indeed — Charlie Munger was all-in on his thesis. Here are the four stocks that Charlie Munger held at the time of his unfortunate passing.

Wells Fargo (Charlie Munger’s Biggest Position, $65 million dollars)

Charlie Munger often emphasized the importance of investing in high-quality businesses with enduring competitive advantages. In other words, Munger believed that paying a fair price for an excellent business was a more prudent investing strategy than attempting to find bargains in mediocre companies. For Charlie Munger, Wells Fargo was exactly that. 

Wells Fargo is an interesting case, because it’s an area where Munger and long-time partner Warren Buffett disagreed. Buffett’s fund Berkshire Hathaway held a position in Wells Fargo in 1990, noting,

“Our purchases of Wells Fargo in 1990 were helped by a chaotic market in bank stocks. The disarray was appropriate: Month by month the foolish loan decisions of once well-regarded banks were put on public display. As one huge loss after another was unveiled — often on the heels of managerial assurances that all was well — investors understandably concluded that no bank’s numbers were to be trusted. Aided by their flight from bank stocks, we purchased our 10% interest in Wells Fargo for $290 million, less than five times after-tax earnings, and less than three times pre-tax earnings.”

Munger started buying Wells Fargo a bit later, using $20 million dollars from treasury bonds to finance the purchase of Wells Fargo at the height of the financial crisis. With Wells Fargo trading near $7 per share, Munger acquired a grand total of just under $1.6 million. 

For Munger and Buffett, the choices to buy Wells Fargo came at different times, but with the same philosophy: A big panic swept through the market, less astute investors sold everything small and large, and with fear at a high, Munger came in to fill their baskets at a steep discount. 

This is a staple in Munger and Buffett’s investment philosophy. However, in 2017, the two diverged in their view of Wells Fargo after a scandal in which Wells was revealed to have created a vast number of “fake accounts” accounts in customers’ names without their permission to meet internal targets.

In the words of Munger,

“Warren got disenchanted with Wells Fargo,” 

But not Munger. Munger said of the discrepancy between his and Warren’s portfolio, “I don’t think it’s required that we be the same on everything.” 

Munger chalked the mistakes of Wells Fargo up to old management, noting that they were not “consciously malevolent” or “thieving” but had instead made “a big error of judgment.”

Clearly it was a great choice. Munger still retains 1.5918 million of his investment, with a cost basis near $7 dollars per share. Today, Wells Fargo trades at $44.11.

Bank of America (Charlie Munger’s Second Largest Position, $62.974M)

With both of Munger’s two largest investments placed in two of the biggest banks in the U.S., you would think Munger loved the banks. In reality, Munger was critical of most banks, quoted as saying, 

“The trouble with banking is we have more banks than bankers,” […] “There’s a lot of temptation to do dumb things, which will make the earnings next quarter go up, but are bad for the long term,” he said. “Some bankers yield to the temptations.”

Munger has also said in 2023 that American banks are full of “bad loans” on U.S. commercial properties. 

Still, Munger has said that a properly run bank is good for society, and that’s how he feels about Bank of America. “The trouble with banking is we have more banks than bankers,” he continued. “The kind of executives that have a Buffett-like mindset that never get in trouble are a minority group.”

Still, Munger said, “I do think a properly run bank is good for civilization.”

Like his investment in Wells Fargo, Warren bought the majority of his position in Bank of America in Q4 of 2016, and has never sold any shares in the company. He originally acquired his 2.3 million shares for $44.3 million dollars. Despite BAC having fallen -38.9% since its 2022 high, Munger’s investment is still up significantly.

Like Wells Fargo, according to Munger, Bank of America is a high quality business at a low price.

Alibaba (Charlie Munger’s 3rd Largest Position, With $26M)

By far Munger’s most unique position, Alibaba is a high conviction investment from Charlie Munger, who bought Alibaba with leverage. Charlie Munger rarely ever used leverage to purchase stocks, but he did so in Alibaba. Here’s what he said when asked why he used leverage to buy Alibaba, which goes far against the conventional wisdom of most in the world of finance

“I often ask myself a mental question. I say, “What is the appropriate percentage of your net worth you should put in a stock if you think it’s an absolute cinch?” Well if you’re the kind of fellow who’s right and you think something is a cinch, the answer is 100%. Maybe 150%. But nobody teaches people to think that way in finance. But if the opportunity is great enough, the logical answer is 100%, or maybe 200%.”

Munger attempted to use the same philosophy to invest in Alibaba as he did in the banks above — in the third quarter of 2021, when Alibaba shareholders were exiting the stock en masse due to Beijing’s crackdown on Jack Ma, he quadrupled his holdings of the stock. 

This is despite Munger once saying, “the three things that ruin people are ladies, liquor, and leverage.” Indeed, Munger succumbed to his own warning in 2022, when during the first quarter, he sold half of his Alibaba position at a loss.

On the sale, Munger said, “I got charmed by the idea of their position on the Chinese internet; I didn’t stop to realize they’re still a goddamn retailer. It’s going to be a competitive business, the internet — it’s not going to be a cakewalk for everybody.” Munger went on to say,

“I regard Alibaba as one of the worst mistakes I ever made.” 

While his initial investment was one of Munger’s biggest mistakes, Munger still believed in Alibaba’s ability to scale into the future and take the world of e-commerce by storm, which is why he retained the stock as his third largest position. Munger’s estimated cost basis in Alibaba is $171 dollars.

US Bancorp (The 4th and Final Position in Charlie Munger’s Portfolio, Worth $4.6M)

Charlie Munger bought US Bancorp in the fourth quarter of 2013 at what he considered to be a great price for this smaller U.S. bank. At the time, Munger’s purchase price was $5.37 million, meaning he has thus far taken a small loss on this position. However, perhaps this is the final lesson that Munger left us with — unless the position is taken with so much leverage that you are forced out, if you believed in the position, and you still believe in it, you should remain in it regardless of market fluctuations. Munger’s high-commitment investment style was exemplified in his small, concentrated portfolio. Despite US Bancorp having fallen and risen over the years, at one point being up nearly 66%, Munger has never sold a single share of the stock.

Lessons We Can Learn from Charlie Munger

While Munger wasn’t always right, he stuck to his strategy with a high level of conviction. For instance, after being wrong about Bitcoin during the early adoption era, Munger didn’t flip simply because the market did. Munger regarded Bitcoin as “crap” and continued to call it that until his death. Instead, Munger’s only sale of stock on this list was a forced sale due to a leveraged loss in Alibaba. Munger believed in investing in quality businesses, with a wide moat, at a fair price. He also believed in his partner Warren Buffett’s ideology — the best time to sell a stock is never.

Munger also often spoke about the inevitability of making mistakes and the importance of learning from them. He believed that acknowledging and understanding one’s mistakes, like his in Alibaba, was a crucial step toward improvement. Rather than fearing failure, Munger encouraged individuals to view it as a natural part of the learning process. Most importantly, Munger emphasized something that is key to any investment: Patience. Munger was a proponent of patient investing and taking a long-term view. He often spoke about the importance of thinking in decades rather than days or months. Munger’s success with holding stocks for the long haul exemplifies the power of patience and strategic, long-term thinking. 

Charlie Munger’s legacy extends far beyond the world of finance. His principles of interdisciplinary thinking, continuous learning, ethical decision-making, resilience in the face of mistakes, and patience offer valuable guidance for anyone navigating a career. By embracing these lessons, we as traders and investors can develop a holistic and sustainable approach to success, grounded in wisdom that withstands the test of time.

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