How Warren Buffett's Partner Charlie Munger Wagered His $2.6 Billion Fortune on Just Three Bets

Charlie Munger, the late Vice Chairman of Berkshire Hathaway, rejected conventional wisdom about portfolio diversification. At a 2017 conference, he boldly declared that diversification was a “rule for those who don’t know anything,” positioning himself and Warren Buffett as the rare exception to this industry standard. Two years and three months after Munger’s death in November 2023, his bold concentration strategy deserves a fresh look at how these three cornerstone investments have actually performed.

Munger’s skepticism toward spreading investments thin came from decades of success. Before joining Warren Buffett at Berkshire Hathaway, he ran his own investment fund that delivered average annual returns of 19.5% from 1962 to 1975—nearly four times the Dow Jones Industrial Average’s performance. His track record proved he wasn’t just contrarian for the sake of it; he understood the craft of identifying exceptional businesses.

The Three Pillars: Where Munger Put Almost Everything

Munger’s $2.6 billion net worth sat almost entirely in three investments. Had he retained all 18,829 Berkshire Hathaway Class A shares he owned in 1996, his fortune would have exceeded $10 billion—but strategic selling and charitable donations meant his wealth became concentrated in his three highest-conviction ideas. Understanding these three bets reveals how a Warren Buffett partner thought about money when he had plenty to deploy.

Costco: The Business He Called Himself “a Total Addict” For

For decades, Munger sat on Costco Wholesale’s board of directors and wasn’t shy about his devotion. “I love everything about Costco,” he proclaimed in 2022, pledging never to sell a single share. At that time, he held over 187,000 shares valued at $110 million, making him the company’s second-largest shareholder.

Since his passing, Costco shares have surged 47%, accompanied by a 27% dividend increase. Beyond these standard returns, shareholders received a special $15-per-share dividend in January 2024 that delivered a 2.3% yield all on its own. What attracted Munger to Costco was precisely what attracted Warren Buffett to most of his long-term holdings: a “moat”—an entrenched competitive position that lets a company thrive regardless of economic conditions. Costco’s membership model and supply chain dominance fit that description perfectly.

Himalaya Capital: The “Chinese Warren Buffett” Bet

In the early 2000s, Munger entrusted $88 million to Li Lu, founder of Himalaya Capital, who earned the nickname “the Chinese Warren Buffett” for his disciplined value investing approach. This wasn’t a casual delegation of funds; it reflected Munger’s confidence in applying proven investment principles to different markets. Munger himself boasted about “ungodly returns” from this investment, though Himalaya Capital, operating as a private hedge fund, doesn’t publicly detail its performance record.

However, the fund’s largest holding provides a telling indicator: Alphabet (Google’s parent company), representing nearly 40% of the fund’s assets as of the most recent SEC 13F filing, has climbed 130% since Munger’s death. Berkshire Hathaway, another major position within Himalaya Capital, also posted solid gains during this period. The fund’s ability to maintain conviction in value investing while competitors chased technology trends underscores why Munger believed in Li Lu’s approach.

Berkshire Hathaway: The Overwhelming Foundation

Berkshire Hathaway dominated Munger’s portfolio, comprising roughly 90% of his net worth by the time of his passing. He owned 4,033 Class A shares worth approximately $2.2 billion—a concentration that would horrify most diversification advocates. Yet this stake represents a deliberate choice: Munger had sold or donated about 75% of his original Berkshire holdings from 1996, meaning he actively decided to maintain this concentrated position.

Since November 2023, Berkshire Hathaway Class A shares have advanced 37%, validating Munger’s conviction that the company Warren Buffett and he had architected together remained fundamentally sound. Remarkably, Munger had credited himself as the “architect” of modern Berkshire, a company that transformed from extreme value hunting to acquiring “wonderful businesses at fair prices”—a philosophy shift that defined contemporary investing.

The Verdict: Concentration in a World of Index Funds

Here’s where Munger’s three bets sit relative to the broader market: Costco up 47%, Berkshire up 37%, and the S&P 500 up 52% during the same two-year-plus window. On the surface, concentration underperformed the index—a reality that would make most passive investors shrug and rebalance their portfolios.

But that interpretation misses the point of why Warren Buffett’s partner pursued this path. These three holdings aren’t flashy growth stories; they’re fortress-like businesses with enduring competitive advantages. Their ability to deliver double-digit returns during a period when value investing was deeply out of favor suggests that Munger’s principles transcend market cycles. He wasn’t optimizing for short-term relative performance; he was optimizing for long-term compounding of high-quality assets.

The real lesson from Munger’s strategy isn’t that concentration always beats diversification—it’s that concentration demands expertise. For investors who can identify exceptional businesses with durable moats, the math of owning a few wonderful companies often beats owning dozens of mediocre ones. For everyone else, Munger himself prescribed the antidote: diversification through index funds. His three-bet portfolio wasn’t an argument against diversification in general; it was an argument for matching strategy to skill.

Two years after his passing, Warren Buffett’s longtime partner left behind not just financial returns, but a template for thinking differently about how capital compounds when deployed with conviction.