Charlie Munger Explains The Simple Way To Identify Winning Stocks

Well, I can't give you a formulaic approach because I don't use one and I just mix all I just mix all the factors and and if the gap between value and and price is not attractive, I go on to something else. And sometimes it's just quantitative. For instance, when Costco was selling at about 12 or 13 times earnings, I thought that was a ridiculously low value just because the competitive strength of the business was so great and it was so likely to keep doing better and better.

But I can't produce that to a formula for you. I like the cheap real estate. I like the competitive position.

I liked the way the personnel system worked. I I liked everything about it and I thought even though it's three times book or whatever it was then uh that it it's worth more. But that's not a formula that anybody if you want a formula you should go back to graduate school.

They'll give you lots of formulas that won't work. This is the longest we've ever gone in the Bergkshire meeting without Charlie saying that getting to the point where he prefers Costco to Bergkshire. Warren, you are a big believer in the US political system, the financial system, and in every American.

You've said that regardless of who is president, the economy and the US consumer will continue to prosper over the long run. All that said, do you believe that people in this country are more divided today than 50 years ago? Or is it just social media and media in general that blows this divide out of proportion?

And if you do believe the divide has grown, what words of wisdom do you have to possibly help remedy it? I would say this multiple times in my life. People felt the country was more divided than ever.

And I've gone through periods where people I knew and admired thought that because the other party was in in uh power that that there never would be another election that the constitution would have. I've heard everything. Now the interesting thing is this paper from 1942.

Since then, there have been 14 American presidents just since my young venture into the stock market at 11. Uh, I've lived under 14 of the 44 presidents the United States has had. Now, they call Trump 45, but they count Grover Cleveland twice.

So, there's really only been 44 presidents of the United States. And 14 of the 44 have been during this period when that $10,000 became 51 million. Seven have been Republicans.

Seven have been Democrats. One has been assassinated. One has resigned under pressure.

Uh it works. You know, it it it if you if you'd told me at the start, you know, that that you'd have a Cuban missile crisis and you'd have you'd have nuclear weapons and you'd have a panic in 2000, financial panic and you'd have many recessions and you'd have war in the streets in the late60s from a divided country. You'd say, why the hell are you buying stocks?

And through it all, you know, America in fits and starts, but America really really moves ahead. And uh uh we are always we survived a civil war. I mean it and hate to think of having to do it that way, but this country in only less than three of my lifetimes, if you go back three of my lifetimes, uh you go back 263 years, I guess, and uh Thomas Jefferson is 12 years old.

And that's just three and there was nothing here. it. You know, you've flown in from all over to Omaha today and you flew over a country with more than 75 million owner occupied homes and 260 million vehicles and great universities and medical systems and and everything.

And it's all it's all a net gain in less than three of my lifetime. So, and we've had these events uh since since I started buying my first stock. this country really really works and it and it always will have lots of disagreements and after every election you'll have people feeling the world is coming to an end and you know how could this happen and I remember my future father-in-law in 1952 he wanted to have a talk with me before uh his daughter and I got married so kind of reluctantly I sat down with him and he he said, "Warren," he said, "there's just one thing I want to tell you.

" He said, "You're going to fail. Uh he said, you know, the Democrats are going to get in. You know, they're going to take over the country and you're going to fail, but don't feel responsible for it because it's not your fault.

" I mean, he wanted to absolve me from this feeling that while his daughter was starving to death, it was my fault. and and I kept buying stocks and doing a little bit better all the time. But and if the Republicans were in, it was okay.

And it was because of them that I was doing well. And if they were out, forget it. It was all going to disappear.

So, I've been I've seen a lot of American public opinion over the years. I've seen a lot of media commentary. I've seen the headlines.

And when you get all through with it, this country has six times the per capita GDP growth uh the GDP per capita that it had when I was born. One person's lifetime. Six for one change.

Everybody in this room essentially is living better in multiple ways than John D. Rockerfeller senior was who was the richest person you know in the world at the uh during my early years and and we're all living better than than he could live. So this is a remarkable remarkable uh country and we found something very special.

I would love to be I would love to be a baby being born in the United States today. Charlie. Okay, Charlie, you give the other side of this.

Well, there's a tendency to think that our present politicians are much worse than any we had in the past, but we tend to forget how awful our politicians were in the past. I can I can remember a prominent senator arguing with an absolute earnestness that mediocre people ought to have more representation on the United States Supreme Court. Yeah, he came from Nebraska.

Incidentally, he did. He came from Nebraska. So, we're not quite as bad as that yet.

Yeah, he he succeeded my dad in the House of Representatives. It wasn't. Okay.

Hi, I'm Teresa Lig Ligazinski. I'm from Omaha, Nebraska. And I have a question about Microsoft.

You have gotten into the tech world with buying Apple. Um, you have Mr Gates there. I'm just wondering why you've never bought Microsoft.

Well, in the in the earlier years, it's very clear it's the answer is stupidity. But the uh but uh since Bill has particularly since Bill has joined the board, but even even earlier than that because of our friendship, it would be it just would be a mistake for Bergkshire to buy Microsoft because if something happened a week later, a month later in terms of them having better earnings than expected or making an acquisition, anything Both Bill and I would incorrectly but would be would be a target of suggestions and accusations perhaps even that somehow he had told me something or vice versa away from I try to stay away from a few things just totally because uh the the inference would be drawn that that we might have talked I might have talked to somebody about something. So I I've I've told the I've told the fellows that Ted and Todd, for example, that they're just a few things that are off the list.

Uh because there'd be a lot of people that wouldn't believe us if something good immediately happened after we bought it. And of course, we to buy a lot of stock, you can take six months to buy it or something of the sort. Uh we just don't need it.

Uh but both that and my stupidity have cost us a lot of money. So uh it's a very it's a good question and and uh I think I think the answer makes sense. Charlie, well, it's part of theology that a late conversion is better than ever.

And you've greatly approved yourself.