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Liang Chen
Steven Chen
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Takeaways and Wisdom From the Daily Journal Annual Meeting

Charlie Munger says the strongest companies in the world are in China

February 16, 2020 | About:

As anticipated, Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) Vice Chairman Charlie Munger (Trades, Portfolio) took the stage and shared his wisdom with investors from all over the world last week at the Daily Journal Corp. (NASDAQ:DJCO) annual meeting. Thanks to CNBC and YouTube, those who were not able to make it can watch the replay any time (highly recommended). In the meantime, we would like to share a couple of our takeaways and favorite quotes from the meeting below. You will read a few of the high-frequency buzzwords from Munger.

China

“I think the strongest companies are not in America. I think the Chinese companies are stronger and they’re growing faster.”

It is to our little surprise that Munger thinks Chinese companies are superior to their American counterparts. But he also recommended hunting where the hunting is easy, which, of course, depends on investors’ respective circle of competence. Munger implied that there might be more bargains in the Chinese market, which just reminded us of the hefty valuations across the majority of the developed world. In general, we do not believe that the “China play” is for most of us when it comes to investing or business in general, but it does not hurt to shoot for some knowledge and insights from one of the world’s most competitive and fast-moving markets.

During the meeting, Munger endorsed Lu Li, who invests in China, saying that “he’s the most successful investors in the whole damn room.”

“In China, the average holding period of individual investors is short. They love to gamble in stocks.

They are so good at everything else. It shows how hard it is to be rational.”

We fully acknowledge such a speculative phenomenon in China and think that irrationalities typically create opportunities, especially for long-term investors.

Wretched excess

“I think that the wretched excesses in a lot of well-paid hedge funds and private equity businesses will in due time result in a lot of troubles that give pain.”

Munger has seen demand for “fewer and better investment managers” and mentioned the well-recognized tailwind of indexing, which has been reshaping the asset management space. He also criticized the proliferation of Ebitda among Wall Street professionals and foresaw the upcoming wane of the ongoing innovation boom.

Tesla

Our favorite quotes from the meeting were in respect to Tesla (NASDAQ:TSLA) and its CEO, Elon Musk.

“I have two thoughts [about Tesla’s stock]: I would never buy it, and I would never sell it short.

I have a third comment… Never underestimate the man who overestimates himself.

Tesla’s sales went up because Elon's convinced people that he can cure cancer.”

Disclosure: The mention of any security in this article does not constitute an investment recommendation. Investors should always conduct careful analysis themselves or consult with their investment advisors before acting in the stock market. We own shares of Berkshire Hathaway.

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About the author:

Steven Chen
Steven CHEN is a quality-focused investor (with bottom-up opportunistic approaches), an ex-hedge fund analyst on Wall Street, a serial entrepreneur, computer scientist, and free-market capitalist.

Steven is the Managing Partner of Urbem Partnership, a value/quality-focused investment partnership fund (www.urbem.capital), and Urbem Capital, the research boutique that focuses on the highest-quality 0.1% of all public companies worldwide.

Steven can be reached at [email protected] or through LinkedIn.

Visit Steven Chen's Website


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