The Legacy of Charlie Munger's Investment Philosophy: A Two-Year Performance Review of His Three Cornerstone Holdings

Charlie Munger, the late vice chairman of Berkshire Hathaway, stood firmly against conventional investment wisdom. While most advisors preach the virtues of diversification, Munger dismissed it as a strategy for those “who don’t know anything.” His partner Warren Buffett echoed this sentiment, arguing that diversification made “very little sense for anyone that knows what they’re doing.”

This wasn’t mere bravado. Before joining forces with Buffett, Munger independently managed an investment fund that delivered 19.5% average annual returns between 1962 and 1975—nearly quadrupling the performance of the Dow Jones Industrial Average. After his passing in November 2023, Buffett reflected on Munger’s profound influence, crediting him as the architect who fundamentally reshaped Berkshire’s investment approach: moving away from deep-value hunting toward acquiring “wonderful businesses at fair prices.”

Understanding Munger’s Investment Conviction

At the time of his death, Munger’s $2.6 billion net worth was almost entirely concentrated in just three investments—a radical departure from diversification orthodoxy. Like Buffett, Munger hunted relentlessly for companies with durable competitive advantages, often termed “moats,” that could withstand economic headwinds and maintain pricing power.

The investing books and principles that guided Munger throughout his career centered on value investing fundamentals established by figures like Benjamin Graham, which emphasized finding exceptional businesses trading at reasonable valuations.

How His Three High-Conviction Bets Have Performed

Costco Wholesale: The Retail Champion

Munger’s decades-long presence on Costco’s board reflected his deep admiration for the company. In 2022, he proclaimed himself “a total addict” and pledged to never sell a single share. His portfolio held over 187,000 shares valued at approximately $110 million at that time, making him the company’s second-largest shareholder.

Since Munger’s passing, Costco investors have reaped substantial rewards. Shares appreciated 47% while the company increased its dividend by 27%. Beyond regular distributions, a special dividend of $15 per share in January 2024 delivered an additional 2.3% yield to shareholders of record—demonstrating the company’s robust cash generation capabilities.

Himalaya Capital: The Growth Multiplier

In the early 2000s, Munger entrusted $88 million to Li Lu, widely regarded as “the Chinese Warren Buffett” for his disciplined application of value investing principles in Asian markets. Himalaya Capital, the resulting investment vehicle, operates as a private hedge fund adhering strictly to the value framework championed by Munger and Graham.

Munger’s faith in Li’s stewardship proved prescient, with his initial capital multiplying into what he described as “ungodly returns.” While Himalaya doesn’t publicly disclose detailed performance metrics, its portfolio composition offers clues. Alphabet represents nearly 40% of fund assets, having surged 130% since Munger’s death. Berkshire Hathaway, another significant holding, similarly contributed solid gains during this period.

Berkshire Hathaway: The Foundation

Perhaps surprisingly, given his standing, Munger’s wealth paled compared to Buffett’s. A critical factor: he had sold or donated roughly 75% of his 18,829 Berkshire Class A shares by 1996. Had he retained that original stake, analysts estimate his net worth would have reached approximately $10 billion.

At death, Munger held 4,033 Class A shares worth roughly $2.2 billion—representing nearly 90% of his total wealth. In the subsequent two years plus one month, Berkshire Class A shares gained 37%, demonstrating the continued vitality of the company’s underlying business fundamentals.

The Verdict: Results Beyond the Numbers

Comparing absolute returns, the picture appears mixed. Berkshire rose 38%, Costco climbed 47%, while the S&P 500 surged 52% during the same timeframe. By this narrow metric, Munger’s holdings underperformed the broader market.

Yet this analysis misses the essence of his investment philosophy. Munger prioritized businesses with fortress-like fundamentals over chasing momentum. His selections—each with sustainable competitive advantages, predictable cash flows, and management excellence—intrinsically carry lower risk profiles than average market participants.

The fact that these value-oriented holdings delivered respectable double-digit returns during a period when value investing fell decidedly out of favor suggests something profound: the principles Munger lived by and documented through his writings and talks transcend market cycles. His investment thesis remains validated, serving as a timeless blueprint for disciplined investors willing to think independently and act with conviction.