By far, the biggest influence on Berkshire Hathaway’s (NYSE:BRKA) Warren Buffett was Benjamin Graham, author of the classic The Intelligent Investor and a big proponent of deep value investing. Interestingly enough, Graham also was a professor for Buffett while at Columbia Business School.
However, there was someone else who would be pivotal in Buffett’s investment approach: Charlie Munger. They met in 1959 and became instant friends. Munger was an attorney but would eventually focus on investing, going on to he post market-beating returns. In 1979, he would become Berkshire’s vice chairman.
It has certainly been an amazing run — Berkshire now has a market value of $189 billion.
Munger recently gave a presentation, called “A Morning with Charlie.” As should be no surprise, it was full of excellent advice.
Munger mentioned Berkshire’s purchase of See’s Candies, which occurred in the early 1970s. It was certainly an unusual investment, because the duo always wanted to get assets at dirt-cheap prices. That was the Graham way.
But with See’s, the company’s main asset was its brand. It was essentially intangible – and it was expensive.
Of course, it turned out to be a home run and changed Berkshire’s investment approach. To this end, the firm would pay premium prices for brands like Coca-Cola (NYSE:KO), Proctor & Gamble (NYSE:PG) and Johnson & Johnson (NYSE:JNJ). The result has been strong long-term returns.
But how about some of Munger’s latest picks? What are the other brands that should also provide great returns?
One is Google (Nasdaq:GOOG). He likes the brand and believes the company is positioned nicely. After all, Google continues to dominate Internet search, has a strong video business (with YouTube) and is growing quickly with its mobile operating system, Android. Who says Munger is a fuddy-duddy?
He also is a big fan of Costco (Nasdaq:COST). He thinks it is one of the best companies in the world. The main reason is that it is always focused on finding ways to provide better value for its customers.
Costco shares are already up 51% for the past 12 months, but quality does not come cheap. Or as Charlie would say, “You get what you pay for.”
Tom Taulli’s latest book is “All About Short Selling” and he has an upcoming book called “All About Commodities.” You can find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.
