New Graham & Doddsville Issue: Pabrai, Moroz, Carr, Peterson & More

Columbia Business School is out with the Fall 2019 issue of its Graham & Doddsville newsletter.  It features interviews with Mohnish Pabrai (Pabrai Investment Funds), Paul Moroz (Mawer Investment Management), Ellen Carr (Weaver C. Barksdale), and Matthew Peterson (Peterson Capital).

These managers talk about names such as Wolters Kluwer, Alphabet (GOOG), Constellation Software (CSU.TO), GrafTech (EAF), DailyJournal (DJCO), and more.

The issue also features student investment pitches from the Pershing Square Challenge, including long Aramark (ARMK), long ServiceMaster (SERV), long US Foods (USFD).


Embedded below is the Fall 2019 issue of Graham & Doddsville:



You can download a .pdf copy here.

Charlie Munger Daily Journal Meeting 2018 Summary, Transcript, Audio Recording

Charlie Munger recently concluded his Daily Journal (DJCO) meeting for 2018.  We've pulled select quotes from a full transcript and an audio recording, thanks to LatticeWorkInvesting's great effort.  Here's select quotes from Munger with links to the other options below.


Summary of Charlie Munger's Daily Journal 2018 Meeting


On the banking industry: "Well, banking is a very peculiar business.  The temptations that come to a banking CEO are way…the temptations to do something stupid are way greater in banking than they are in most businesses.  Therefore it’s a dangerous place to invest because there are a lot of way in banking to make the near term future look good by taking risks you really shouldn’t take for the sake of the long-term future.  And so banking is a dangerous place to invest and there are a few exceptions.  And Berkshire has tried to (pick) the exceptions as best it could."


On incentive fees:  "Suppose you’re charging say 1 and 20, one percent off the top and twenty percent of profits…or even worse, two percent off the top and twenty percent of profits…and you’ve got $30 billion or so under management and an army of young ambitious people, all of whom want to get unreasonably rich very fast.  What are your chances of doing better for your clients?  Well the average entity that charges those fees, the chances the clients will do well is pretty poor.  That’s the reason Warren won that bet against the hedge funds.  Where he bet on the S&P averages and they bet on carefully selected bunch of geniuses charging very high fees.  And of course the high fees will just kill you.  It’s so hard in a competitive world to get big advantages just buying securities, particularly when you’re doing it by the billion, and then you add the burden of very high fees and think that by working hard and reading a lot of sell-side research and so forth, that you’re going to do well.  It’s delusional.  It’s not good to face the world in a delusional way.  And I don’t think, when Berkshire came up, we had an easier world than you people are facing this point forward, and I don’t think you’re going to get the kind of results we got by just doing what we did. "


On the best fee structure for investment funds:  He said it's the original Buffett Partnership structure and went on to say:  "Yeah, Buffett copied that from Graham.  And Mohnish Pabrai is probably here…is Mohnish here?  Stand up and wave to them Mohnish.  This man uses the Buffett formula, and always has, he just copied it.  And Mohnish has just completed 10 years…where he was making up for a high water-mark.  So he took nothing off the top at all for 10 years, he sucked his living out of his own capital for ten long years, because that’s what a good money manager should be cheerfully willing to do.  But there aren’t many Mohnish’s.  Everybody else wants to scrape it off the top in gobs.  And it’s a wrong system.  Why shouldn’t a man who has to manage your money whose 40 years of age be already rich?  Why would you want to give your money to somebody who hasn’t accumulated anything by the time he was 40.  If he has some money, why should he on the downside suffer right along with you the investor?  I’m not talking about the employees under the top manager.  But I like the Buffett formula.  Here he is, he’s had these huge successes.  Huge in Buffett’s career.  But who is copying the Buffett formula?  Well we got Mohnish and maybe there are a few others, probably in the room.  But everybody wants to scrape it off the top, because that’s what everybody really needs, is a check every month.  That’s what is comforting to human nature.  And of course half the population, that’s all they have, they’re living pay check to pay check.  The Buffett formula was that he took 25% of the profits over 6% per annum with a high water mark.  So if the investor didn’t get 6%, Buffett would get nothing.  And that’s Mohnish’s system.  And I like that system, but it’s like many things that I like and I think should spread, we get like almost no successes spreading that system.  It’s too hard.  The people who are capable of attracting money on more lenient terms, it just seems too hard.  If it were easier, I think there would be more copying of the Buffett system."


On investor Li Lu: "What was unusual about Li Lu.  Li Lu is one of the most successful investors.  Imagine him, he just popped out of somebody’s womb and he just assaulted life the best he could and he ended up pretty good at it.  But he was very good at a lot.  He’s ferociously smart.  It really helps to be intelligent.  He’s very energetic.  That also helps.  And he has a good temperament.  And he’s very aggressive, and he’s willing to patiently wait and then aggressively pounce. A very desirable temperament to have.  And if the reverse comes, he takes it well.  Also a good quality to have.  So it’s not very hard to figure out what works.  But there aren’t that many Li Lu’s.  In my life, I’ve given money to one outside manager, and that’s Li Lu.  No others in my whole life.  And I have no feelings that it would be easy to find a second.  It’s not that there aren’t others out there, but they’re hard to find.  It doesn’t help you if a stock is a wonderful thing to buy if you can’t figure it out."


On his view of big consumer brand moats in the age of Amazon and Costco Kirkland etc:  "Well the big consumer brands are still very valuable.  But they had an easier time in a former era than they’re going to have in the future era.  So you’re right about that.  And of course Amazon I don’t know that much about except that it’s unbelievably aggressive.  And the man who heads it is ferociously smart.  On the other hand he’s trying to do things that are difficult.  Costco I know a lot about because I’ve been a director for about 20 years and I think Costco will continue to flourish and it’s a damn miracle the way the Kirkland brand keeps getting more and more accepted.  You’re right about that.  So you’re right that it’s going to be harder for the big brands, but they’re still quite valuable.  If you could own say, the Snicker’s Bar trademarks and so forth, it will still be a good asset 60 years from now.  Now it may not be quite as good for the owner as it was in the last 60 years.  But it doesn’t have to be.  But in fact it makes it harder for you investors.  It use to be the groupie could buy Nestle and they’d think, ‘Well, I’ll just sit on…(inaudible)’.  I don’t think it’s quite that simple anymore.  It’s harder.  You’re right.  But you know that."


On Buffett's claim in 1999 he could return 50% if he ran only $1 million & if that's achievable today:  "Well I do think that a very smart man who’s patient and aggressive in combination, is willing to work hard, to root around in untraveled places like thinly traded stocks and other odd places.  I do think a person with a lot of shrewdness, working with a small amount of capital, can probably earn high returns on capital even today ... Generally speaking, I would say, if you’re shrewd enough with small sums of money, I think you can compound pretty well.  The minute you get bigger sums, I think it starts getting difficult.  It’s way more difficult for all you people sitting here than it was for me when I was in your position.  But I’m about to die and you have a lot of years ahead. You would not want to trade your position for mine"


On the airline industry and Berkshire's decision to invest:  "Well, we did change our mind.  For a long time, Warren and I (painted over) the railroad because there were too many of them, and it was too competitive, and union rules were too crazy.  They were lousy investments for about 75 years.  And then they finally…the world changed and they double decked all the trains and they got down to four big rail systems in all the United States in terms of freight and all of a sudden we liked railroads.  It took about 75 years.  Warren and I never looked at railroads for about 50 years, and then we bought one ... Now airlines, Warren use to joke about them.  He’d say that the investing class would have done better if the Wright Brothers would never have invented flight.  But given the conditions that were present when the stock was purchased and given the conditions of Berkshire Hathaway where it was drowning in money, we thought it was ok to buy a bunch of airline stocks.  What more can I say?  Certainly it’s ok to change your mind when the facts change.  And to some extent the facts had changed, and to some extent they haven’t.  It is harder to create the little competing airlines than it was.  And the industry has maybe learned something.  I hope it works better, but I don’t think its…I think the chances of us buying airlines and holding them for 100 years is going to work that well.  I think that’s pretty low."


General quote:  "Why would you risk what you have and need in order to get what you don’t have and don’t need?  It really is stupid."


Here's the link to the full transcript and to a soft audio recording of the event; shout out to LatticeWork again for posting these up.

And for more from this great investor, head to Charlie Munger's recommended reading list.

Charlie Munger Q&A After Daily Journal Meeting 2017

Last week we highlighted Charlie Munger's talk at the Daily Journal annual meeting for 2017.

Someone has also posted videos of Munger's Q&A session after the meeting.  There's 22 short videos in total with a playlist at the bottom.


Here's a few takeaways:

- He always reads 3 or 4 newspapers every morning: WSJ, New York Times, Financial Times, LA Times

- Thinks a single-payer healthcare system would work a lot better

- They're doing a lot of stuff (investment wise) these days that they wouldn't have done in the 'old days.'  Specifically mentioned Apple (AAPL): "It's a very odd thing for us to do.  And obviously we've got no special insights as to how sticky Apple's business is."

-  "I think young people should learn more and shout less."

- "The trouble with real estate is everybody else understands it.  And the people you're competing with specialize in little blocks and they know more about the industry than you do."

- "I think a lot of easy money that comes into finance just ruins practically everything."

- BYD is another stock they never would have done back in his younger day.  Partly he's betting on the horseman there as he's fanatical about his business.

- Amazon's Jeff "Bezos is utterly brilliant and utterly remorselessly ambitious.  I would never bet against Jeff Bezos."

- Interested in the 'agricultural revolution' like gene splicing etc and says the world needs it as we have to get more out of our existing land.

-  "If you haven't prepared (for the opportunity) then you won't seize it."

- "If you run a business where people have to trust your food, you just can't afford to have a scandal." re: Chipotle (CMG). 

- Do you think Walmart (WMT) can turn into Sears (SHLD)?  "Well, not for a long time."

- On the airlines: it's more concentrated (fewer players) and there's no real substitute for air travel.  "I don't regard it as a perfect model."  Considering how the world's changed, they thought it was a decent opportunity... but it's "not a cinch."  "It's a sector bet, not a bet on individual airlines."

- Munger says he read Barrons for 50 years and found 1 investment opportunity... made $80 million on it.  Then gave that money to Li Lu, who turned it into $400-500 million.  Munger's also read Fortune for 60 years but never bought a stock due to it.

- "I don't like to gamble against up odds.  If the odds are against me I just don't play."

- Nowadays it's tough in merger arbitrage as it's too crowded

- On John Malone: he's something of a genius and doesn't like to pay taxes and has been very successful and Munger's just ignored it.  "I've always been troubled by the cable industry."  Munger doesn't like the movie business either.

- Doesn't talk to Ted Weschler and Todd Combs a ton, but some.  "They're both good in their own way and they both love Berkshire and they've both made contributions."  Sounds as though the younger portfolio managers helped Charlie and Warren Buffett think differently about things like the airlines and Apple. 

- "I don't want to be in the bottom 80% of the auto dealerships."

- On 'cloning' in investing: "I do it all the time."  He added, "Of course it's useful."  He talked about the trouble with it is if you pick investors later in their game (i.e. Berkshire Hathaway) you basically inherit their problems of being constrained by size because they have to invest a certain way.  So Munger encouraged younger people to look at slightly younger investors, though admitted it's harder to pick out the right people to follow.

- On mistakes: "We learned a lot vicariously, but also learned a lot from unpleasant experiences. You'll learn." 


Embedded below is the video playlist of Munger's Q&A session after the Daily Journal meeting.  Just let the videos keep playing to see the next one out of the 22 total short clips:



Be sure to also check out Charlie Munger's talk at the Daily Journal annual meeting for 2017 as well.

What We're Reading ~ 4/29/15

A book with a really cheesy title that supposedly 3G Capital hands out [Amazon]

More detailed notes from Charlie Munger's annual meeting part 1 & part 2 [Forbes]

A dozen things learned about investing from Peter Lynch [25iq]

The first rule of short selling is: don't talk about short selling [Dead Companies Walking]

Margin debt: a market indicator that predicts nothing [Bloomberg View]

The great bond conundrum [Economist]

Wang Jianlin - a billionaire at the intersection of business and power in China [NYTimes]

On China in Africa [Council on Foreign Relations]

Common biases that affect business decisions [HBR]

Jeff Bezos penned his annual letter [Amazon]

The biggest threat to your portfolio [Reformed Broker]

Examining Einhorn's latest investment: AerCap Holdings [Value and Opportunity]

A look at Windstream [J.Allen Capital]

The cable era is over [Bloomberg View]

A profile of billionaire banker Andy Beal [Bloomberg]

Homeownership rate falls to lowest since 1993 [HousingWire]

The slow death of the University [Chronicle]

Notes From Charlie Munger's Daily Journal Meeting 2015

Charlie Munger's Daily Journal (DJCO) 2015 meeting recently took place.  Alex Rubalcava (@AlexRubalcava) attended and we've aggregated/posted his notes below with permission.


Notes From Charlie Munger's Daily Journal (DJCO) Meeting 2015

Munger on venture capital versus what he does for a living: "It's a really difficult honest way to make a living.  It's not like shooting fish in a barrel, which is how I've made my living."

Software is now a bigger revenue line for DJCO than print and Munger "thinks of it like Jeff Bezos" with its operating losses as it grows.

On the switch from pompous boards to activist investors: "I like the new system even less ... Carl Icahn is a very able man but that doesn't mean he should be running the world."

"I did not succeed in life by intelligence.  I succeeded because I have a long attention span."

"I think that someone my age has lived through the best and easiest period in the history of the world."

Munger referenced The Better Angels of Our Nature by Steven Pinker

"When things are damn near impossible, maybe you should stop trying."

Munger sang the praises of Posco at the meeting and also said that he thinks the moat of American Express (AXP) is less than it once was.

"I think it's very difficult to be a value investor with $200B AUM."

"Other people are trying to act smarter.  I'm just trying to be non-idiotic."

"If the incentives are wrong, the behavior will be wrong.  I guarantee it."

On 3G Capital: "They're teaching us something about reality."

"I don't spend too much time thinking about what is almost certain never to happen."

"The finance industry is 5% rational people and 95% shamans and faith healers."

"A lot of our respected financial institutions are just casinos in drag."

"I don't think anything that any average person can do easily is likely to be worthwhile."

"Before marriage, keep your eyes wide open.  After marriage, keep them half shut."

On how to compete in a service oriented biz: identify things that annoy customers and go down the list and get rid of them

Question about if there are parallels between what's happening in TV with what's happened with newspapers: "I've been a little surprised at how well television has survived, but I'm a little suspicious about the local incumbents."

Munger talked about the Chinese air pollution documentary, "Under the Dome."  He says the ability of P2P communication like that documentary is a cautionary tale for old media.

"Nobody survives open heart surgery better than the guy who didn't need the procedure in the first place."

"Index funds will be permanent owners who can never sell.  That will give them power they are not likely to use well."

If you put a gun to his head and told him he had to buy a tech stock, Munger would pick Google (GOOG)

"Valeant (VRX) is like ITT and Harold Geneen come back to life, only the guy is worse this time."

Munger talked about how Singleton was born smarter than Buffett but Buffett worked harder to learn about investing.

"The way to get rich is to keep $10 million in your checking account in case a good deal comes along."


If you missed it, you can also check out notes from Charlie Munger's Daily Journal meeting last year as well for more wisdom.  Be sure to also read Charlie's letter in the most recent Berkshire Hathaway annual report.

Notes From Charlie Munger's Daily Journal Meeting 2014

Thanks to Alex Rubalcava (@AlexRubalcava) for tweeting notes from Charlie Munger's Daily Journal (DJCO) 2014 meeting recently.  We've aggregated and posted the notes below with his permission:


Notes From Charlie Munger's Daily Journal (DJCO) Meeting

"We have a few shareholders and a bunch of groupies."

 Charlie talked about how the legal filings notice is in structural decline, made an analogy to Kodak.

Says Thomson Reuters successfully made the transition.  Also Berkshire ("We didn't have just one failing business at Berkshire.  We had three!" ~ textiles, department stores, stamps)

DJCO attempting a technological transition, working to manage expectations

Working with bureaucracy, government, regulators is one of the core competencies of DJCO's software biz

"I don't like derivatives."

"There is more dementia about finance than there is about sex."

On the Berkshire/THI inversion: "Anyone who thinks this is a travesty is stark raving mad."

Charlie argued for low corporate taxes and higher consumption rates

"People like you have bid our stock up to a price I wouldn't pay"

Charlie has spent at least twenty percent of his comments inveighing against gambling

"I've always read Paul Krugman because he's the smartest leftist I've ever read, and he uses the King's English very well."

On Alibaba:  "I know nothing about the company except that it's powerful."

Munger's asset allocation is basically Berkshire, Costco, and "an Asian fund" (Li Lu's Himalayan Capital?)

"All my holdings are making new highs. Am I doing it wrong?"

On avoiding mistakes: "All you have to do is take your head out of a place it shouldn't be."

Charlie praised Ron Chernow's biography of Rockefeller (Titan: The Life of John D. Rockefeller, Sr)

Do individual investors still have an advantage over institutions? Some can do it but it's very hard

On managing a portfolio of 200 stocks: "I would shrink from that responsibility."

Charlie says Buffett will write extensively in this year's annual report about the why and how of Berkshire's success and why it will continue after Warren and Charlie are no longer running it.  "You will find this year's report very, very interpreting."

"I think Elon Musk is a genius and I don't use that word lightly.  And he's one of the boldest men ever."

On Japan: "They've got so much stimulus you can't find a pothole on a side of a mountain anywhere in the country."

Praised a large money manager who indexes his US equities and searches for value in less efficient markets

On his partnership with Warren: "People don't ordinarily get a divorce after they've been together for fifty years.  I think Einstein needed someone to talk to."

"If I were the benevolent dictator of America we would have a single payer health care with an opt out provision."

"The thing about Berkshire is that the results are prodigious but the people producing the results aren't prodigies."

On his secret to success:  Get the no-brainers off his desk immediately

"I think two years from now MidAmerican will be the biggest utility company in the United States."

Charlie says he bought DJCO for $2.7 million, then dividended out the original $2.7 three years later.  Company is basically cost basis zero.


Thanks again to Alex and be sure to follow him on Twitter here: @AlexRubalcava


You can also check out more thoughts from Charlie via Jason Zweig here.

Notes From Charlie Munger's Daily Journal Meeting

Some of you may be unaware that Warren Buffett's partner at Berkshire Hathaway, Charlie Munger, has aided in the management of The Daily Journal (DJCO) portfolio where he's the Chairman.  Munger spoke yesterday at the Daily Journal meeting and the following notes are courtesy of Alex Rubalcava.

Notes From Charlie Munger's Daily Journal Meeting

- Munger talked about the embedded options in the public notice papers he bought for Daily Journal... Phoenix public notice paper generated "thousands of percent" return for Daily Journal

- "Many of you people are here because you're investment groupies, not Daily Journal shareholders."

- "I don't think anyone on the board or management of General Motors had one shred of guilt for destroying 100% of the equity of the greatest company in America."

- "It's hard to predict which comfortable two company duopolies will become ghastly competitive miasmas."

- Munger on ratings agencies: they were selling opinions, not guarantees.  But in front of a jury the internal emails will cause trouble.

- Munger, quoting Buffett "I'm waiting for a list of business that we declined because it was morally beneath us."

- On why other CEOs can't copy the Berkshire Hathaway (BRK.A) operating model: "They came to power at 58 and they're gone at 63."

- "I think the idea that everyone can have wonderful results from stocks is inherently crazy.  Nobody expects everyone to succeed at poker."

- "I made zero transactions in my PA (personal account) last year."

- Munger praised Pabrai for copying Buffett's Partnership model down to the last comma

- Question on BYD, Munger calls up Li Lu to talk: BYD compounded at 75% since its founding 15 years ago.  Talked about engineering, problem-solving culture at BYD.  Munger on it: "I don't want to compete with 180,000 young Chinese.  I'd rather partner with them."

- There was a question on why he's chosen not to disclose what's in the DJCO investment portfolio.  Munger says "many of you have already figured out what's in our investment portfolio."

- Munger recommended a book: A Universe out of Nothing by Lawrence Krause

- Munger is bearish on retailing, saying he switched from name brand toothpaste to Kirkland Signature (COST private label)

- Question: have you changed your investment philosophy due to macro concerns?  Nope

- Warren Buffett recommended a book to new Berkshire portfolio manager Todd Combs, called The Outsiders by William Thorndike.  Munger recommended it with enthusiasm.

- Munger talked about pricing power as the mark of a great investment.  (We've highlighted how pricing power is what Buffett is often looking for in an investment)


For more resources on this great investor, be sure to check out:

-  Charlie Munger and Warren Buffett's secrets to investing success.

- Charlie Munger on the psychology of human misjudgment

- An interview with Munger