Warren Buffett and Charlie Munger’s Best Advice

…talk about the best advice they have even gotten in a short piece from Fortune.  I think it clarifies the difference between a blind value investor and an investor who is looking for good companies (not coincidentally, many of those good companies have good relative strength).  Warren Buffett and Charlie Munger have made a fortune implementing this advice.

Buffett: I had been oriented toward cheap securities. Charlie said that was the wrong way to look at it. I had learned it from Ben Graham, a hero of mine. [Charlie] said that the way to make really big money over time is to invest in a good business and stick to it and then maybe add more good businesses to it. That was a big, big, big change for me. I didn’t make it immediately and would lapse back. But it had a huge effect on my results. He was dead right.

Munger: I have a habit in life. I observe what works and what doesn’t and why.

I highlighted the fun parts.  Buffett started out as a Ben Graham value investor.  Then Charlie wised him up.

Valuation has its place, obviously.  All things being equal, it’s better to buy cheaply than to pay up.  But Charlie Munger had observed that good businesses tended to keep on going.  The same thing is typically true of strong stocks—and most often those are the stocks of strong businesses.

Buy strong businesses and stick with them as long as they remain strong.

Source: CNN/Money (click on image to enlarge)

One Response to Warren Buffett and Charlie Munger’s Best Advice

  1. Ant says:

    Buffett is no longer the Oracle of Omaha; he is now just another Wall St hedge fund manager. He earned his reputation by buying undervalued companies with strong management, and then using his financial strength to clear their balance sheet and let them grow. It was very “Midwestern Values” and earned him the reputation for honesty and sincerity and success despite being anti-Wall St.

    But Buffett and BRK have morphed in the last few years. He is now a substantial derivative player. He played “vulture capitalist” with BAC, GS, and others. He’s learned that playing politics is now part of the game. He just bought Heinz in a classic PE deal, with a partner known for stripping costs and replacing management. And whether by chance or not, his recent deals with Lubrizol and Heinz were marred by insider trading. Buffett is now as pure Wall St as Lloyd Blankfein. Both are brilliant investors and money makers, but their word can’t be trusted. I read Buffett’s letter to investors trying to figure out his angle, not looking for wisdom.