My 5 Favorite Warren Buffett and Charlie Munger Quotes From the Berkshire Hathaway Annual Meetings

From a new must read book for Buffett and Munger lovers

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Today, we bring back Alex Morris of the TSOH Investing Research Service to the podcast. Alex has just published a new book called Buffett and Munger Unscripted: Three Decades of Investment and Business Insights from the Berkshire Hathaway Shareholder Meetings. Here is the Amazon link. Buy it now!

Alex has been generous with his time and regularly comes on the Chit Chat Stocks Podcast (usually at least once a year). We thank him for helping us make a quality show. If you’ve found value from his work on the show, consider purchasing a copy of this book.

I think any listener of Chit Chat Stocks will enjoy this book. It is a compilation of the most insightful quotes from Warren Buffett and Charlie Munger from the annual meetings. That’s right, Alex painstakingly listened, transcribed, and organized the insights from these investing legends into a single book. That is a lot of hours listening to two guys from Omaha eat chocolate from See’s Candies (among other things).

Topics in the book include valuation, capital allocation, management, and your circle of competence.

Here are my five favorites of the innumerable lessons you can take away from these meetings.

1. On When to Sell

If we lose confidence in management or in the durability of the competitive advantage, or if we recognize that we made a mistake, we sell. On the other hand, if you really get a wonderful business with outstanding management — mostly the wonderful business part — when in doubt keep holding. But it’s not an inviolable rule.”

-Buffett at the 2009 annual meeting

2. Share Repurchases and Stupidity

There’s been more stupid stuff written, and stupid stuff done, on such a simple activity as stock repurchases. It’s a very simple decision, in my view, as to whether you repurchase shares. You do it if you’re taking care of the needs of the business and if your stock is selling for less than it’s intrsinsically worth. I don’t see how it could be more simple.

-Buffett at the 2015 annual meeting

3. On Executive Compensation

We really invented a more extreme system: Executives can buy Berkshire Hathaway stock in the market for cash. This is a very old-fashioned system. It doesn’t take any lawyers or compensation consultants…Most of them have done it, and most of them have done very well with it. I don’t know why it doesn’t spread more."

-Charlie Munger at the 1996 annual meeting

4. On Corrupt Accounting Practices

I go so far as to say it’s fundamentally wrong not to have rational, honest accounting in big American corporations. And it’s very important not to let little corruptions start because they become big corruptions. Then you have vested interestes that fight to perpetuate them. There are a lot of wonderful companies that issue stock options, and those stock options go to a lot of wonderful employees that are really earning them. But that said, the accounting in America is corrupt. And it is not a good idea to have corrupt accounting.

-Charlie Munger at the 1999 annual meeting

5. Inflation and Business Quality

Inflation destroys value, but unequally. The best business to have during inflation is one that retains its earnings power in real dollars without commensurate investment to, in effet, fund the inflation-produced nominal growth. The worst kind of business is one where you have to keep putting more and more money into a lousy business…Charlie and I are always suspicious that inflation will regain some of the momentum it had a couple of decades ago. We always think it’s in sort of remission…Inflation is always a factor in calculating the kind of business we want to buy. But it isn’t like it crowds out all other factors. It’s always been with us. See’s Candies has done fine during an inflationary period because it doesn’t have huge capital investments to make in current dollars.

-Warren Buffett at the 2005 annual meeting

There you have it. Give this podcast episode a listen and download/buy the book. There are plenty of more insightful quotes like the ones above.

-Brett

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