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Charlie Munger’s Sit-on-Your-Ass Investing Concept

Charlie Munger presented the model of “Sit on your ass investing” at the 2000 Berkshire Hathaway Annual meeting. Description courtesy of Losch Management Company, an Orlando, Florida-based investment advisor.

'Charlie Munger: The Complete Investor' by Tren Griffin (ISBN 023117098X) You have value investing, and growth investing, but now we also have “sit on your ass investing”, which is better.

The problem with value investing is it requires too much work.

First you have to find an undervalued stock and buy it cheap. Then you have to sell it when it the price reaches or exceeds your calculated figure for its intrinsic value.

Because this requires many decisions over a long period of time, Charlie Munger prefers his own method in which all you have to do is pick a really great company when it is attractively priced, and then just sit on your ass. The great advantage being that it only requires one decision.

Charlie said: “If you buy a business just because it’s undervalued then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies then you can sit on your ass … that’s a good thing.”

The whole idea of not having to do something extraordinary is one all investors should heed, yet it is easy to forget, particularly in stressful situations.

Recommended Reading: ‘Charlie Munger: The Complete Investor’ by Tren Griffin

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Mungerisms: Amusing Quotes from Charlie Munger from the Berkshire Hathaway 2014 Annual Meeting

Amusing Quotes from Charlie Munger from the Berkshire Hathaway 2014 Annual Meeting

Charlie Munger is not always politically correct, always offers a wealth of information, and hilarious now and then. At the 2014 annual meeting of Berkshire Hathaway, here are some of his best zingers:

  • On the interplay between CEOs and corporate directors regarding compensation: “You start paying directors of corporations two or three hundred thousand dollars a year, it creates a daisy chain of reciprocity where they keep raising the CEO and he keeps recommending more pay for the directors.”
  • On CEO pay and work habits: “Does the Supreme Court work less hard because they don’t get paid like corporate executives? We have some corporate directors who draw more pay than members of the Supreme Court. That’s crazy,”
  • 'Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger' by Peter D. Kaufman and Ed Wexler (ISBN 1578645018) On taxing the 1%: “The taxes on wealth were much higher when I was much younger. So for somebody of my age, I don’t think they’re ruining the world because I’ve lived through way more punitive taxes on the rich than we have now … I don’t think everybody who’s been especially favored should take the last dollar that he or she should get. I think we all have an obligation to dampen these fires of envy.”
  • On Facebook, Twitter, and the appeal of social media: “It just doesn’t interest me at all to gab all the time on the Internet with people and I certainly hate the idea of young people putting in permanent form the dumbest thoughts and the dumbest reports of action that you can ever imagine.”
  • On his favorite advance in technology: “I’m in love with the Xerox machine.”
  • On Donald Sterling, the then-owner of NBA Clippers, who then faced racial remarks and lifetime ban:”He’s a peculiar man. He’s past 80. His girlfriend has had so many facelifts she practically can’t smile. This is not the noblest ideal of what the American businessman should be.”

Insightful books about Charlie Munger

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Prem Watsa’s Recommended Books for 2015

Prem Watsa of Fairfax Financial Holdings (Canada)

Legendary investor and philanthropist John Templeton was Prem Watsa’s mentor and was deeply interested in spiritual growth. In the past, Watsa has recurrently recommended Templeton’s “Riches for the Mind and Spirit”, “The Templeton Plan”, and “Discovering Laws of Life”.

Legendary investor and philanthropist John Templeton In the Fairfax Financial Holdings’ annual meetings in previous years, Watsa has also highlighted an inspirational movie called “The Little Red Wagon” that the Templeton Foundation supported. In an interview with online investment community Gurufocus, Watsa previously said,

But I try to be neutral, sometimes more short than long, but that’s John Templeton. So John, one of the key lessons he taught me was to be flexible. His investment philosophy was always value oriented, long term, buy at the point of maximum pessimism, but be flexible in your thinking, and that’s what we try to apply.

Books Recommended by Prem Watsa at Fairfax’s Annual Meeting on 16-Apr-2015

At the annual meeting of shareholders of Fairfax Financial Holdings Limited on 16-Apr-2015 at the Roy Thomson Hall in Toronto, Prem Watsa recommended the following books:

  1. John Templeton’s “Riches for the Mind and Spirit”. Watsa mentioned a quote about giving that he said Fairfax feels very strongly about: “Self-improvement comes mainly from trying to help others.” In speaking of Fairfax’s philanthropic efforts, Watsa also said it’s better to help the receivers grow.
  2. Stephen G. Post’s “Is Ultimate Reality Unlimited Love?” For fifteen years, Post held discussions with John Templeton on the topic of pure unlimited love. The book covers how John Templeton arrived at his philosophy as a youth growing up in Tennessee. This book draws from previously unpublished letters and interviews with physicists, theologians, and other close associates and family of John Templeton.
  3. 'Investing the Templeton Way' by Lauren Templeton, Scott Phillips (ISBN 0071545638) Lauren Templeton and Scott Phillips’s “Investing the Templeton Way”. Lauren Templeton is the grand-niece of John Templeton and Scott Phillips is her husband. Together, they run Chattanooga, Tennessee-based Templeton & Phillips Capital Management. Investing the Templeton Way focuses on the critical role of temperament, and how mastering this element to investing equips the investor to succeed across the span of time and varying market circumstances.
  4. Louis V. Gerstner, Jr.’s “Who Says Elephants Can’t Dance?” This book is an account of IBM’s historic turnaround led by Gerstner during his tenure as chairman and CEO of IBM from April 1993 until March 2002. Gerstner led IBM from the brink of bankruptcy and mainframe obscurity back into the forefront of the technology business.
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Warren Buffet’s Big Gig: Capital Allocation

Warren Buffett's Recommended Books on Investing

Most of us know Warren Buffet as perhaps the greatest investor who has ever lived. Thinking about how to invest. But, behind the scenes, he also runs Berkshire Hathaway.

Warren Buffet is the CEO there at Berkshire Hathaway. No doubt, Berkshire owns stocks which Buffett himself purchased. But Berkshire also owns 100% of franchises whole bunch of other businesses. Including household names Diary Queen, Fruit of the Loom, Geico, Netjets, etc.

Warren Buffett started to make his living from investing on the stockmarket in 1951, and was deeply influenced by Ben Graham, who wrote a classic book on investment, “Security Analysis” (1934), and had been his tutor at Columbia University.

Berkshire Hathaway, for much of its long history, was only in the textile business. Using its very modest excess cash flow, Berkshire Hathaway in its present form was created. The morph of Berkshire Hathaway from a sleepy New England company producing men’s suit liners to the present day conglomerate generating more than $100 million of cash a week is one of the best business lessons of our age.

Bill Gates should take a close look at Warren Buffett’s business model at Berkshire Hathaway. Managers at the various Berkshire companies use whatever portion of the cash flow they generate to grow their respective businesses and send the rest to Omaha for Buffett to allocate as he sees fit. Net users of cash (like Executive Jet) get whatever cash they need from Omaha to continue growing their business.

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The Four Filters of Warren Buffett and Charlie Munger

Charlie Munger and Warren Buffett, Berkshire Hathaway

Countless portfolio managers, hedge fund managers, investment analysts, mutual funds, institutional pools of capital and individual investors have grown up devouring everything that’s been said or written by or about Warren Buffett and Charlie Munger over the years.

In the 2007 letter to Berkshire Hathaway shareholders, Warren Buffett wrote, “Charlie and I look for companies that have a) a business we understand; b) favorable long-term economics; c) able and trustworthy management; and d) a sensible price tag.” Based on this sage advice, value investors must look for:

  • A business that we can understand. A business within your circle of competence.
  • A business with favorable long-term prospects. A business with a line of business that is not easy to duplicate. A business with excellent cash flow profile: excellent ability to generate and invest cash.
  • A business led and perated by honest and competent people.
  • A business available for sale at a very attractive price.
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Prem Watsa’s Recommended Books for 2014

Prem Watsa of Fairfax Financial Holdings (Canada)

Prem Watsa is a shrewd investor who is often called the Canadian Warren Buffett. He is an immigrant from India who arrived in Canada in 1972 and has been running Fairfax Financial Holdings since 1985. Prem Watsa was born in Hyderabad and studied chemical engineering at IIT-Chennai before emigrating to Canada. Under his leadership, Fairfax’s sales and earnings have been growing and it’s stock price has compounded at the average rate of 19 percent annually.

On understanding and managing risk, Prem Watsa has said, “this idea exists in the marketplace that you can take any risk, put it into a structure, into an asset-backed bond, and you can eliminate, get rid of the risk. … Protect yourself, you don’t know when Katrina comes in.”

Here are five books recommended by Prem Watsa at the 2014 annual meeting of Fairfax Financial Holdings on 09-Apr-2014, Wednesday at Toronto’s Roy Thomson Hall.

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Books Recommended by Berkshire Hathaway’s Charlie Munger

“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time—none, zero. You’d be amazed at how much Warren reads—at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
— Charlie Munger

Charlie Munger (Vice-Chairman at Berkshire Hathaway) and Mugerisms Charlie Munger is Warren Buffett’s partner and Vice-Chairman at Berkshire Hathaway, the investment conglomerate. In his capacity, Munger has been a behind-the-scenes co-thinker at Berkshire and has influenced many a decision made by Warren Buffett.

At the 2004 annual meeting of Berkshire Hathaway, Charlie Munger said,

“We read a lot. I don’t know anyone who’s wise who doesn’t read a lot. But that’s not enough: You have to have a temperament to grab ideas and do sensible things. Most people don’t grab the right ideas or don’t know what to do with them.”
— Charlie Munger

Munger was chair of Wesco Financial Corporation from 1984 through 2011. He is also the chair of the Daily Journal Corporation, based in Los Angeles, California, and a director of Costco Wholesale Corporation. Unlike Warren Buffett, Charlie Munger has claimed that he is a generalist for whom investment is only one of a broad range of interests that include architecture, philosophy, philanthropy, investing, yacht-design, etc.

Charlie Munger is a voracious reader and engages in books on history, science, biography and psychology. He once said, “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time—none, zero. You’d be amazed at how much Warren reads—at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”

At the 2014 annual meeting of The Daily Journal Company that Charlie Munger leds as Chairman, Charlie said,

“I’m very selective. I, sometimes, skim. I, sometimes, read one chapter and I sometimes read the damn thing twice. It’s been my experience in life [that] if you just keep thinking and reading, you don’t have to work.”

Charlie Munger’s Book Recommendations in Biography

Charlie Munger’s Book Recommendations in Biology

Charlie Munger’s Book Recommendations in Business & Investing

Charlie Munger’s Book Recommendations in Management & Leadership

Charlie Munger’s Book Recommendations in Philosphy & Psychology

Charlie Munger’s Book Recommendations in Sociology

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Definitive List of Books on Warren Buffett, the World’s Greatest Investor

Warren Buffett, Berkshire Hathaway

Warren Buffett, the “Oracle of Omaha,” is the Chairman and CEO of Berkshire Hathaway. He is arguably the world’s most successful investor, and one of the richest and most respected businessmen in the world.

“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time—none, zero. You’d be amazed at how much Warren reads—at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
Charlie Munger

Warren Buffett, his partner Charlie Munger, and Berkshire Hathaway have become the face of capitalism at its best. The company is a multifaceted, extensive collection of businesses and investments spanning railroads to manufactured homes, underwear to jewelry, and encyclopedias to newspapers. Warren Buffett and Charlie Munger are exceptional investors and overseers of a vast business empire. They are brilliant at having discipline and rigor in their investment and management methodologies, in finding great businesses to invest in, and, letting the managers of Berkshire’s businesses go about their duties with little interference from headquarters. Another distinctive feature of Berkshire Hathaway is that Warren amd Charlie are in it for the long term, quite in contrast with traders, speculators, and buy-out artists who crowd Wall Street today.

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Warren Buffett, the Mattress Salesman at Nebraska Furniture Mart

One of the traditions at the Berkshire Hathaway annual meetings is an hour-long light-hearted movie show. In fact, the “movie” is a collection of video clips some of which showcase commerials and skits from Berkshire Hathaway’s vast array of businesses, some featuring Buffett-comedy, surprise celebrity features, and so on, often to wild laughter among the crowd.

'Tap Dancing to Work: Warren Buffett on Practically Everything' by Warren Buffett with Carol Loomis (ISBN 1591845734) In 2013, the Berkshire Hathaway video started with a cartoon version of Dancing with the Stars with Warren Buffett and partner Charlie Munger as judges. After the judges dismissed every contestant, including Dairy Queen and the Geico Gecko, the judges themselves won the contest by dancing to the Gangnam Style. The 2013 movie also had clips of Warren Buffett and Fortune Magazine’s Carol Loomis appearing on the Daily Show with Jon Stewart to promote “Tap Dancing to Work: Warren Buffett on Practically Everything”. A humorous debate over “ketchup” vs. “catsup” from the sitcom King of Queens highlighted Berkshire Hathaway’s buyout of H.J. Heinz Company (in partnership with Brazil’s 3G Capital.)

In recent years, the “movie” has also featured Warren Buffett’s opening statement to a Committee of the U.S. House of Representatives on the Salomon Saga. “Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless,” warns Mr. Buffett at the end of that opening statement.

The security staff at the Berkshire Hathaway meetings forbid attendees from recording audio or video from the opening movie due to confidentiality and copyright restrictions. At the beginning of the movie, a voice-over or video recording from Warren Buffett assures appearances from “a number of people you recognize” and reminds that the celebrities work for free, at the request of the notoriously stingy Buffett. “Surprise, surprise.”

Over the years, the most popular clips in the movie feature a hilarious Warren Buffett attempting at diverse jobs in Berkshire’s businesses. Here’s one from Berkshire’s furniture business, Nebraska Furniture Mart.

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The Warren and Charlie Show at Berkshire Hathaway’s Annual Meetings

Berkshire Hathaway Annual Meetings

Berkshire Hathaway Annual Meetings

At the Berkshire Hathaway annual shareholders meetings in Omaha, Warren Buffet and Charlie Munger sit at the center of the stage in front of a dark sea of shareholders. Warren Buffet first fields questions from the audience and a panel of journalists and stock analysts. Warren answers them and will ramble on a bit in his unique way (often with a one-liner or two mixed in) for a few minutes.

Then, Warren will look over to his partner and query, “Charlie?” Then Charlie Munger will either lean in and make a sharp, critical, pithy, often derisive comment (which usually extracts gasps or loud chuckles from the audience) or simply remark, “I have nothing to say,” which can be entertaining particularly after a long-winded digression from Warren Buffett.

Berkshire Hathaway annual shareholders meetings are normally held on the first Saturday of May in Omaha, Nebraska.

Berkshire Hathaway Annual Meetings

Berkshire Hathaway Annual Meetings

Berkshire Hathaway Annual Meetings

Recommended Reading

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