Warren Buffett’s business partner Charlie Munger knew how to find first-class firms at reasonable valuations, says Dr. Mike Tubbs. So which stocks fit the bill in today’s stockmarkets?
Charlie Munger made a fortune on his own account before joining Warren Buffett as partner and vice chairman of Berkshire Hathaway, Buffett’s $900bn investment vehicle. Buffett once noted that “Charlie thinks about business, economics and investment matters better than anyone I know and I’ve learned a lot over the years by listening to him”. Munger famously said that “A great business at a fair price is superior to a fair business at a great price”.
Buffett valued this thought since he had concentrated on value stocks early in his career. In this article we will examine some companies that fit Munger’s description. But before we do that, it is worth sharing one of the most famous of his many quotes about life. He said “All I want to know is where I’m going to die, so I’ll never go there”. Munger sadly died in November 2023, just five weeks before his 100th birthday. Interestingly, as a teenager he worked in a grocery store owned by Buffett’s grandfather.
Long-standing leaders in their field
A good example of a great company is Coca-Cola. Buffett invested $1bn in the company’s shares in 1988, when they cost $2.73. Since then the price has risen more than 22-fold. He has increased his stake over the years, and Berkshire Hathaway now owns 9% of the group. Coca-Cola’s recent share price is $60, with a forward price/earnings (p/e) ratio of 21.5 and a forward dividend yield of 3.2%. The dividend has been raised every year for 61 years. Berkshire has received dividends every year to add to the total return, so $2.73 per share was clearly a fair price to pay in 1988.
Coca-Cola has many of the features of a great company. Firstly, it has a so-called moat (an enduring competitive advantage) provided by its strong brands – including Coca-Cola itself, one of the world’s top-ten brands, as well as Fanta, Costa coffee and Schweppes. The group accounts for a massive global market share of 43.7% of non-alcoholic beverage sales. This moat gives the company pricing power, which has enabled it steadily to increase revenue, profits and dividends.
It also sells products in over 200 countries, which gives it the useful combination of reliable income from developed markets with higher growth from emerging m
