“Value Investing in a Low-Rate World: Can the Style Thrive Without Charlie Munger?”

Accident – Death – Obituary News : Munger’s Death Raises Questions About the Future of Value Investing

The recent passing of Charlie Munger, the vice chairman of Berkshire Hathaway and a renowned value investor, has left a void not only at the top of the company but also in the world of value investing. Munger was known for championing the value-investing style, which focuses on buying quality businesses at fair prices rather than simply looking for the cheapest stocks.

However, in recent years, value investing has faced challenges as growth stocks, which are often associated with higher valuations, have outperformed value shares. This trend has been fueled by the years of ultralow interest rates following the 2008 financial crisis, which have made it cheaper for businesses to borrow and have made stocks more attractive relative to other assets like government bonds.

Now, with the Federal Reserve signaling that it will start cutting interest rates, some investors are questioning whether value stocks can thrive in the current environment. Munger himself acknowledged before his death that the traditional hunting grounds of value investors had been picked over, and that investors may have to own some richly valued tech companies just to keep pace with the market.

Despite these challenges, many of Munger’s followers remain faithful to his investing playbook. They continue to identify the fundamental value of businesses and bet big when opportunities arise. Munger’s influence on value investing was significant, as he shifted the focus from buying fair businesses at wonderful prices to buying wonderful businesses at fair prices, according to Warren Buffett, Munger’s longtime business partner and chairman of Berkshire Hathaway.

Berkshire Hathaway itself is a testament to the success of Munger’s approach. The company, which is now the seventh-largest U.S. company by market value, has built a massive stock portfolio and operates a wide range of businesses acquired using value-investing principles. Berkshire also holds more than $150 billion in cash and has a stock portfolio worth over $300 billion, which includes major companies like Coca-Cola, American Express, and Bank of America.

In his annual letter to shareholders, Buffett emphasized the importance of a small number of successful investments. He highlighted Berkshire’s stakes in Coca-Cola and American Express, which were both acquired using value-investing principles and have provided significant returns over the years. Berkshire’s own stock has also outperformed the market, soaring more than 41,000% over the past 40 years.

Munger’s version of value investing has prevailed among many stock pickers who continue to follow the approach. However, the methodology of value investing has changed over time, as it is now harder to find cheap stocks in an age when information is readily available to millions of investors. Value investors have had to adapt and focus on buying and holding quality businesses for the long term.

The low-interest-rate environment has also had a significant impact on the performance of value stocks. Growth companies, which are expected to expand their businesses and generate increasing amounts of cash in the future, have benefited more from lower interest rates. This has led to the dominance of big tech stocks in recent years, with companies like Apple, Microsoft, and Alphabet seeing significant gains.

Given these challenges, Munger suggested that value investors may have to invest in a few tech giants to keep up with the market. Berkshire Hathaway has followed this strategy, amassing a substantial position in Apple, which is now its largest stockholding.

While the future of value investing may be uncertain, Munger’s legacy and the principles he espoused continue to influence investors. Many value investors remain committed to identifying the fundamental value of businesses and investing in quality companies at fair prices. As the investing landscape evolves, value investing may also need to adapt and find new opportunities to thrive..