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American billionaire investor Charles Munger poses for a portrait with his arms folded in Los … [+] Angeles, California, March 9, 1988. (Photo by Bonnie Schiffman/Getty Images) Getty Images Charlie Munger, one of the greatest investors of all-time, died this week. He was 99. Munger was a successful attorney and Warren Buffett’s most trusted partner at Berkshire Hathaway. Munger was able to wisely opine on many subjects. This article is about the most important investing lesson I learned from Charlie Munger: only invest in high-quality businesses. High-Quality Stocks Compound Best When Warren Buffett first met Charlie Munger at a dinner party in 1959, Buffett was more of a classic value investor who focused on investing in companies at cheap prices. Munger helped Buffett transform Berkshire Hathaway into the Mona Lisa of corporate conglomerates by convincing Buffett to only invest in wonderful businesses at a fair price. Munger has long advocated for investing in high-quality businesses with strong brands, competitive advantages, and the ability to raise prices over time. One of Berkshire’s best investments of all time, See’s Candies, fit these criteria. When Berkshire bought the company in 1972, it was a well-established confectionary company based in California. As a California native, Munger was familiar with the brand and its sterling reputation. He convinced Buffett to deviate from his traditional approach of buying cheap, undervalued companies and instead pay a premium for a company Munger considered a high-quality compounder. Turns out, Munger was right. See’s Candies, originally purchased for $25 million, has since generated over $2 billion in pre-tax earnings. This investment not only provided substantial returns, but also taught Buffett valuable lessons about the power of brands and quality, shaping future investment decisions. For example, Berkshire later bought a large stake in Coca-Cola, based on a similar premise. Munger had…

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Filed under: News - @ December 4, 2023 2:24 am