Monday, July 4, 2011

Final Wesco Meeting: A Morning With Charlie Munger

Below is how Charlie Munger opened what was effectively the final Wesco Financial annual meeting along with some notes summarizing a few other comments he made of interest.

Charlie has had a loyal following to this event for years but Wesco is no longer publicly traded after Berkshire Hathaway (BRK-A) acquired the remaining shares of the company last month.

Since now no longer a separate public company the question was who'd pay for this event. Charlie decided to pay for it himself.

From this The Motley Fool article:

"Most of you know exactly what I think about every subject, but you still come anyway. It's a damn cult."

Charlie Munger's Thoughts on the World: Part 1

"You need a new cult hero," Munger said. "I'm doing you all a favor by not having another one of these meetings."

"We'll be talking about a lot today," he told the crowd of 500. "Some of it is academic. Some philosophical. And some will be about investments because I know you're all a bunch of greedy bastards."

On the Wall Street Meltdown
"The cause was a combination of megalomania, stupidity, insanity, and I would say evil on the part of bankers and mortgage brokers."

On Berkshire
"Berkshire's stock is at a point Buffett and I never anticipated it would go to.

Investors owning Berkshire at current prices will do quite all right just sitting on their rear ends."

On Derivatives
"We don't need these kinds of innovation in finance. It's OK to be boring in finance. What we want is innovation in widgets."

On See's Candies
"...we didn't know the power of a good brand. Over time we just discovered that we could raise prices 10% a year and no one cared. Learning that changed Berkshire. It was really important."

On Tech Stocks
"...it's hard to imagine Google (Nasdaq: GOOG) not having a strong position in the future. I don't know how you can replace Google. For other tech companies, of course there are very real threats."

It's notable that Munger apparently thinks Berkshire's stock currently presents a good value. He's not exactly been known to pump Berkshire's stock in the past. Actually, both Buffett and Munger have historically done quite the opposite. Their preference instead being that the stock fluctuate in a range that roughly approximates Berkshire's intrinsic value.

"...we would rather see Berkshire's stock price at a fair level than a high level. Obviously, Charlie and I can't control Berkshire’s price. But by our policies and communications, we can encourage informed, rational behavior by owners that, in turn, will tend to produce a stock price that is also rational. Our it's-as-bad-to-be-overvalued-as-to-be-undervalued approach may disappoint some shareholders. We believe, however, that it affords Berkshire the best prospect of attracting long-term investors who seek to profit from the progress of the company rather than from the investment mistakes of their partners." - From the Berkshire Hathaway Owner's Manual:

"...managers start with the assumption, all too common, that their job at all times is to encourage the highest stock price possible (a premise with which we adamantly disagree)." - From the 1998 Berkshire Hathaway Shareholder Letter

Munger mentioned during the meeting that his favorite company outside Berkshire is, not surprisingly, Costco (NYSE: COST). His admiration for that company has been expressed on many occasions.

Like many, I have always looked forward to Charlie's blunt and insightful comments that come out of this meeting each year.

I, for one, in the absence of this meeting will hope that he continues to share his thoughts through interviews, speeches, and otherwise.

Check out the full article.

Adam

Long BRKb and GOOG

Related posts:
Final Wesco Meeting: More from Charlie Munger
Charlie Munger on Accountants & High-Speed Traders
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