Charles Munger: There’s Nothing Mysterious About Great Investing

During his fireside chat with Todd Combs, Charles Munger explained why there’s nothing mysterious about great investing. Here’s an excerpt from the conversation:

Munger: You’ve got to remember that Warren made a lot of money running his Geiger counter over the ’30s. He’d find something selling for 1/4 of the liquidation value, he’d load up. So for a long period of time, he had to have that hunting ground. All he had to do was go to lists of liquid securities and slowly buy them, and he could get these ridiculous bargains. And those bargains went away, and so he really had to change.

Now, they haven’t gone totally away. It isn’t like there aren’t some companies that are not great businesses, but they’re still a great investment. I can remember Ballard Petroleum, one of the biggest independent refineries.

I mean I bought that stock personally at $17 a share. LIFI Inventories, [inaudible], buried reserves, selling below book value. It was just an incredible bargain, but it was still an ordinary commodity-type business. When it tripled, I sold it. It’s doubled since then. That’s a lot of years ago.

But it’s perfectly acceptable to invest in the Ballard Petroleums of the world. But I think the people who tend to get the best results are these fanatics who just keep searching for the great businesses.

And the best of them don’t expect to find 10 or 20 or 30. They find one or two. And that’s the right way to do it — but all you need are one or two. I know the guy who invests with the banker that backed the Costco copy which was Home Depot.

He also backed Eli Lilly very early. He has several billion dollars between those two investments. He didn’t need any more. And in a lifetime of investment banking, that’s what he got: two. I regard that as a successful life. That isn’t what they teach in our educational institutions.

They think it’s some mystery they can teach that will make you good at investing. It’s total bullshit. There is no way to know enough about a thousand different stocks to be very good at it. If you insist on going, you go, “I want a thousand.” If you want to be good, you have to pick a few. That’s what I call the Wooden system of stock picking.

You can listen to the entire discussion here: