How Charlie Munger's Concentrated Bets Are Faring Two Years Later: A Deep Dive Into Warren Buffett's Partner's Investment Thesis

The Philosophy Behind Extreme Concentration

When Charlie Munger—Warren Buffett’s decades-long partner at Berkshire Hathaway—passed away in November 2023, he left behind a portfolio that defied conventional wisdom. With a net worth of approximately $2.6 billion, nearly 90% of his wealth sat in just three investments. This wasn’t accidental; it reflected a deliberate rejection of diversification as a strategy for knowledgeable investors.

Munger famously dismissed diversification as “a rule for those who don’t know anything,” a philosophy that mirrored Buffett’s own views. Before co-founding Berkshire Hathaway, Munger ran his own investment fund that generated average annual returns of 19.5% from 1962 to 1975—nearly quadrupling the Dow Jones Industrial Average’s performance. His track record proved he knew exactly what he was doing.

The Three Pillars of Munger’s Wealth: Performance Update

Alphabet Leads the Pack Through Himalaya Capital

Among Munger’s holdings, his $88 million investment in Himalaya Capital—a private fund managed by Li Lu, often called “the Chinese Warren Buffett”—has delivered exceptional returns. While Himalaya doesn’t disclose public performance metrics, its largest position, Alphabet, which comprised nearly 40% of fund assets in recent filings, has surged 130% since Munger’s death. This concentration in tech, rooted in value investing principles, has proven remarkably resilient even as markets favored growth elsewhere.

Berkshire Hathaway: The Core Portfolio Foundation

Berkshire Hathaway Class A shares formed the backbone of Munger’s wealth, accounting for roughly 90% of his $2.6 billion net worth at the time of his passing. Munger held 4,033 Class A shares worth approximately $2.2 billion—a position significantly smaller than it could have been. Had he retained the 18,829 shares he owned in 1996 instead of selling or donating 75% of that stake, his net worth would have reached an estimated $10 billion.

Over the past two years and one month, Berkshire Class A shares have climbed 37%, demonstrating steady capital appreciation in what some argue is a more defensive holding compared to pure growth plays.

Costco: The Vocal Conviction Play

Munger’s enthusiasm for Costco Wholesale was perhaps his most publicly expressed conviction. Serving on the retailer’s board for decades, he called himself “a total addict” and vowed never to sell his shares. As the company’s second-largest shareholder with over 187,000 shares, he professed to “love everything about Costco” in 2022 when those shares were worth $110 million.

Since Munger’s death, Costco shares have returned 47%—outpacing both Berkshire and the broader market’s relative strength. Beyond stock appreciation, the company increased its dividend by 27% and paid a special $15-per-share dividend in January 2024, delivering a 2.3% yield boost for shareholders.

Market Context: Are These Returns Exceptional?

The S&P 500 has risen 52% in the same period, slightly outpacing Costco’s 47% gain and Berkshire’s 37% performance. On pure numerical grounds, Munger’s concentrated bet appears to have underperformed the broader index.

However, this snapshot misses a critical dimension: risk-adjusted returns. Munger’s three holdings represent companies with entrenched competitive advantages—what investing professionals call “moats.” Costco’s customer loyalty and operational efficiency, Alphabet’s dominant digital advertising platform, and Berkshire’s sprawling diversified empire all provide defensive characteristics that shield them during market downturns.

The fact that these fundamentally sound businesses delivered double-digit returns in an environment where value investing faced headwinds suggests that Munger’s principles transcend market cycles. His philosophy wasn’t about beating every quarter; it was about owning quality assets that compound over decades.

The Enduring Lesson

Two years after Charlie Munger’s passing, his portfolio strategy remains controversial yet instructive. By concentrating nearly all his wealth in three investments where he possessed deep conviction, Munger accepted concentration risk in exchange for the opportunity to achieve outsized returns through compounding.

For Warren Buffett’s partner, the calculus was straightforward: he understood these businesses intimately. He knew their competitive positioning, their management quality, and their ability to thrive across economic cycles. That knowledge justified the concentration.

While retail investors must evaluate their own risk tolerance and conviction levels, Munger’s track record suggests that focused portfolios built on sound principles and genuine business understanding may prove more durable than fear-driven diversification.