Annual Meeting

2017 Daily Journal Shareholder Meeting Transcript + Q&A with Charlie Munger

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MUNGER: I don't know anything about individual airlines, neither does Warren. We bought a bunch. It was a sector bet, it's not a bet on an individual airlines.

Q: When industries like airlines or railroads rationalize and turn around, how do you and Warren know? I mean...

MUNGER: We don't know. It was easy to—railroad it was all over when we went in. In the airlines it’s not over, but it's a little bit the same story; years of consolidation and bankruptcies. Three, four, five, six big bankruptcies are already in the airlines.

Q: So for 50 years, you've continually read about these industries even though you have disdain for them?

MUNGER: Yes, I talked about patience. I read Barron's for 50 years. In 50 years, I found one investment opportunity in Barron's. Out of which, I made about $80 million with almost no risk. I took the $80 million and gave it to Li Lu who turned it into $400 or $500 million. So, I have made $400 or $500 million on reading Barron's for 50 years and following one idea. 

Now, that doesn't help you very much, does it? I'm sorry but that's the way it really happened. If you can't do it, I didn't have a lot of ideas. I didn't find them that easily, but I did pounce on one. 

Q: Which one was that? Which idea was that? 

MUNGER: It was a little automotive supply company. Anyway, it was a cigar butt.

Q: Is that KMW?

MUNGER: No, I've forgotten the name, but it was a little—it was the Monroe shock absorber and all that stuff. The stock was a dollar and the junk bonds—which paid 11 3/8%—were 35. When I bought the junk bonds, they paid me the 35% and they went right to 107% and they called. And the stock went from 1 to 40, but of course I sold my stock at 15.

Q: What did the article in Barron said?

MUNGER: It said it was a cheap stock.

Q: How long did it take you to make that...

MUNGER: But that's a very funny way to be, to watch for 50 years and act once.

Q: How long did it take you to make that 15-bagger on that stock, from 1 to 15, right?

MUNGER: Maybe a couple of years.

Q: How long did it take you to make the decision to buy it once you read the article?

MUNGER: About an hour and a half.

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