In this article, we discuss the 5 biggest positions in the Charlie Munger stock portfolio. If you want to read our detailed analysis of these stocks, go directly to Charlie Munger Stock Portfolio: 10 Biggest Positions.
5. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 52
The investment made by Buffett and Munger in American Express Company (NYSE:AXP) has been one of the biggest success stories of their careers. The duo started buying the stock in 1963 after a business scandal pulled back the share price. Over the years, the company has transformed into one of the most successful payments firms. However, the rise of fintech and crypto is now threatening the legacy position of the firm, but Munger, while acknowledging the dangers faced by the firm, remains bullish on it.
BMO Capital analyst James Fotheringham recently raised the price target on American Express Company (NYSE:AXP) stock to $151 from $147 and kept a Market Perform rating on the shares, appreciating the earnings beat of the firm in the third quarter.
Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in American Express Company (NYSE:AXP) with 15.3 million shares worth more than $2.5 billion.
In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and American Express Company (NYSE:AXP) was one of them. Here is what the fund said:
“In financials, American Express has done an excellent job demonstrating the resiliency of its franchise in the midst of a global pandemic that drove a 60% decline in its core travel and entertainment business. The company’s spend-centric model has been helped by fiscal stimulus ensuring a flush consumer, while management continues to execute well by adding millions of new consumer and small and medium business accounts, which should benefit the franchise over the medium to long term. We remain optimistic regarding the company’s prospects as travel and entertainment activity rebounds, adding to our position in the quarter.”
4. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 54
It is no secret that Munger is not an admirer of internet stocks like Amazon. Instead, the legendary investor believes that Costco Wholesale Corporation (NASDAQ:COST), another retailer and one of the premier competitors of Amazon, presents much better value for money. He has expressed this sentiment publicly numerous times. In the annual meeting of his Daily Journal Corporation earlier this year, Munger said that people “trusted” Costco to deliver enormous values, noting that this seemed to be one thing that Amazon did not have.
Costco Wholesale Corporation (NASDAQ:COST) has a solid business foundation with an impressive dividend history. On October 13, the firm declared a quarterly dividend of $0.79 per share, in line with previous. The forward yield was 0.71%.
At the end of the second quarter of 2021, 54 hedge funds in the database of Insider Monkey held stakes worth $4.3 billion in Costco Wholesale Corporation (NASDAQ:COST), down from 56 in the preceding quarter worth $4 billion.
In its Q1 2021 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and Costco Wholesale Corporation (NASDAQ:COST) was one of them. Here is what the fund said:
“We saw these dynamics at play in the Fund. Some of the worst-performing stocks this quarter were among our best performers in Q1 2020. Another example was the market’s reaction to Costco Wholesale (1.5% weight in the Fund) during the quarter. From December 31, 2020 to March 8th, Costco shares declined 17% and dropped below their pre-pandemic high. The common rationale offered by sell-side analysts was that Costco would face difficult one-year “comps” (i.e. same-store sales, which compare sales from stores open for at least a year). Because so many consumers rushed to Costco ahead of shelter-in-place and subsequent quarantines, it will be harder for Costco to meaningfully beat those results when compared year-over-year. That may indeed be true, but we struggle to understand how Costco could be “less valuable” than it was a year earlier when it concurrently increased its membership base by over 7%, or 3.9 million members. With membership renewal rates around 90%, the vast majority of the new customers Costco brought in last year will be around for years to come.
Analysts also complained about Costco raising its already industry-leading minimum wage to $16/hour, with an average “effective” pay of $23-$24/hour when you include overtime and bonuses. Costco paying its employees “too much” has been a common gripe of Wall Street analysts for at least two decades. While the extra pay does indeed impact short-term profit margins, it also serves to make Costco more durable, as its flywheel (i.e. a virtuous value cycle) starts with happy employees. A 20-year chart of Costco stock price is evidence that this strategy works and we’re confident that it will continue to work.”
3. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 116
Charlie Munger is a long-time associate of Warren Buffett, the chief of Berkshire Hathaway Inc. (NYSE:BRK-B). Munger is also the Vice Chairman of the firm. Both investors have pioneered a value investing strategy at the company that has transformed it into one of the most successful conglomerates in the world. The firm is among the top 15 most popular stocks among hedge funds and has a solid business foundation.
After long tenures at Berkshire Hathaway Inc. (NYSE:BRK-B), Munger and Buffett, both in their nineties now, have slowly given way to new leadership at the firm. Susan Buffett and Christopher Davis were recently named to the board of the company.
At the end of the second quarter of 2021, 116 hedge funds in the database of Insider Monkey held stakes worth $22 billion in Berkshire Hathaway Inc. (NYSE:BRK-B), up from 111 in the preceding quarter worth $19 billion.
In its Q1 2021 investor letter, Vltava Fund, an asset management firm, highlighted a few stocks and Berkshire Hathaway Inc. (NYSE:BRK-B) was one of them. Here is what the fund said:
“Despite the considerable rise in stock markets over the past year, there are still many attractive opportunities. Human nature also is playing a bit into our hands. Investor crowds often chase popular stocks, hot IPOs, or mysterious SPACs and completely leave aside stocks they consider boring and not sexy enough. A typical example of this category is our long-term largest position in Berkshire Hathaway. Since we bought it for the first time, its price has nearly quadrupled and yet it remains just as undervalued today as it was at that time. Considering the current rate at which it is buying back its own shares and the amount of cash that Berkshire Hathaway has, my greatest wish as a shareholder is for the company’s share price to remain as low as possible for as long as possible.”
2. Zoom Video Communications, Inc. (NASDAQ:ZM)
Number of Hedge Fund Holders: 59
Zoom Video Communications, Inc. (NASDAQ:ZM) features on our list of the biggest positions in the Charlie Munger portfolio because the veteran investor, in an interview with news platform CNBC in June, said he had “fallen in love” with Zoom and believed that Zoom calls, a key feature offered by the firm on the Zoom platform, were “here to stay”. Usually, this level of confidence in the product of a company, displayed publicly, is rare for a man like Munger.
On October 22, investment advisory JPMorgan upgraded Zoom Video Communications, Inc. (NASDAQ:ZM) stock to Overweight from Neutral with a price target of $385. Sterling Auty, an analyst at the firm, issued the ratings update.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Tiger Global Management LLC is a leading shareholder in Zoom Video Communications, Inc. (NASDAQ:ZM) with 4.2 million shares worth more than $1.6 billion.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Zoom Video Communications, Inc. (NASDAQ:ZM) was one of them. Here is what the fund said:
“We concluded our campaigns in Zoom Video Communications. We have been paring our position in Zoom for several quarters, anticipating the reduced need for video conferencing as vaccination rates climb and people return to their workplaces. That said, we believe there is a strong case to be made that the pandemic has prompted a permanent inflection in videoconferencing’s importance—sustainably higher remote work arrangements, more online learning and less business travel. Furthermore, the company’s dramatically expanded user base (up 485% YoY in Q3) positions it well to cross sell additional services, Zoom Phone in particular. The long-term future remains bright, but we decided to end our successful investment campaign in favor of opportunities in our pipeline with more attractive near-term growth prospects.”
1. Micron Technology (NASDAQ:MU)
Number of Hedge Fund Holders: 87
Micron Technology (NASDAQ:MU) is the top holding of Himalaya Capital, an investment firm founded by Li Lu in 1997. Charlie Munger and Warren Buffett were persuaded to invest in Chinese companies through Lu, who introduced the duo to BYD, a Chinese electric vehicle maker. Like Munger, Himalaya Capital has a small portfolio, consisting of only five holdings that include Apple, Facebook, and Alphabet, in addition to Micron and Bank of America.
JPMorgan analyst Harlan Sur has an Overweight rating on Micron Technology (NASDAQ:MU) stock with a price target of $100. The analyst, in an investor note, claimed that the overall demand environment for the firm remained “healthy” despite PC shipment weaknesses.
At the end of the second quarter of 2021, 87 hedge funds in the database of Insider Monkey held stakes worth $6.3 billion in Micron Technology (NASDAQ:MU), down from 100 in the preceding quarter worth $7.6 billion.
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Micron Technology (NASDAQ:MU) was one of them. Here is what the fund said:
“Micron is a manufacturer of memory semiconductor chips. Micron appreciated 17.3% during the quarter.
With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.
As a result, Micron showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.
While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.
The biggest negative surprise in the quarter came from Micron’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”
You can also take a peek at 10 Stocks that Helped Warren Buffett Make $4.6 Billion in Dividends and 10 Best Dividend Stocks with Over 5% Yield According to Hedge Funds.
