Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) recently held its annual meeting, which included hours of shareholder Q&A with CEO Warren Buffett and his right-hand man Charlie Munger. While Buffett is obviously the star of the show, Munger is known for his matter-of-fact quotes on issues that are important to the company's investors.
With that in mind, here are three things Charlie Munger said at this year's meeting that investors need to hear.
1. "Those of you who, after we are gone, sell your Berkshire stock and do something else with it I think are going to do worse. Keep the faith."
Shareholders raised several questions about Berkshire's succession plan, and what should be expected after Buffett and Munger are no longer around. And while we hope both men live well into their 100s, this is certainly a fair point -- Buffett is 87 and Munger is 94, and it's not a certainty that both want to run Berkshire for the rest of their lives, even if they do live for a while longer.
Buffett and Munger both assured shareholders that the right system is in place to keep the company on its path, including recently promoted potential successors Greg Able and Ajit Jain, as well as Buffett's stock-picking lieutenants Ted Weschler and Todd Combs.
Buffett went on to point out that he has been "semi-retired" for years and has been gradually turning over more and more of Berkshire's operations to other people.
2. "The reason companies are buying their stocks is that they are smart enough to know it's better for them than anything else."
Munger said this in response to a question about Apple's recently announced $100 billion buyback plan. Both Buffett and Munger expressed their support of the company's plan.
This may seem counterintuitive, as the main reason Berkshire doesn't buy back any of its shares is that it feels that it can make better use of its profits by acquiring companies or investing in stocks. And a common shareholder criticism of Apple, especially since tax reform allows the company to use its foreign cash more efficiently, is "why doesn't Apple make some big acquisitions?"
It all comes down to a question of intrinsic value of the stock. In Apple's cash, both Buffett and Munger obviously feel that the stock is attractively priced. If they didn't, they wouldn't have bought 75 million more shares of it in 2018.
When it's tough to find reasonably priced acquisition opportunities, as Buffett and Munger both have said is the case, it's a smart use of company cash to buy back stock if it is trading for less than its intrinsic value. To be clear, a company's intrinsic value is somewhat a matter of opinion, but it seems fair to say that Buffett and Munger believe Apple's intrinsic value is considerably more than its current share price.
3."Someone else is trading turds and you decide I can't be left out."
Several high-profile investors and finance professionals have had some harsh words to say about bitcoin and other cryptocurrencies. Warren Buffett himself has cautioned investors that "cryptocurrencies will come to a bad ending."
However, this Munger quote may top them all. His colorfully stated point is that when investors see people trading some asset and making a ton of money on it -- tech stocks in the late 90s, real estate investments in the mid-2000s, and cryptocurrencies today are three modern examples -- people often lose sight over what the asset actually is.
In the case of tech stocks, for example, there were plenty of dot-com stocks that clearly traded for ridiculous valuations and had no revenue, but investors couldn't seem to get enough of. The same scenario seems to be playing out with bitcoin and other cryptocurrencies today, according to Munger.
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Matthew Frankel owns shares of Apple and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.