Column: Is it time to sell my Berkshire?
There have been lots of reactions to the recent death of Charlie Munger, Warren Buffett’s key partner in the transformation of Berkshire Hathaway (BRK-A) from a pitiful, obscure textile company into a giant, mega-visible, mega-valuable conglomerate.
Many people have written and talked about how Munger, whom I knew and liked for more than 40 years, had a dry wit and convinced Buffett, a fellow Omaha native, to start buying good companies at reasonable prices rather than making cheap purchases of “cigar butt” remnant companies that had only a few puffs left.
But I had a totally different reaction: did Munger’s death mean that I should bail out of my Berkshire Class B (BRK-B) stock, which I bought in early 2016?
My answer turned out to be “no,” and let me tell you why.
Part of my reluctance to sell my Berkshire stock involves taxes.
When last I looked, my Berkshire stock was worth almost three times what I paid for it. So selling the stock would trigger a significant capital gains tax bill. (I didn’t buy Berkshire until the first week I became self-employed because I wouldn’t have felt comfortable owning it while working at places like Fortune, Forbes, Money magazine and Newsweek that carried stories about Berkshire, some of which I wrote.)
It also became clear to me over the past several years that even though Munger was still Berkshire’s vice chairman, his influence at Berkshire had pretty much vanished. So his absence is unlikely to make any serious difference in how the company is run.
I enjoy owning Berkshire because it’s a much more interesting company than the others that I have investments in. And it’s vastly more interesting than S&P 500 and total stock market index funds, my two biggest—and most boring—investments.
Another thing: I’ve got a shelf full of Berkshire annual reports, which contain long, discursive shareholder letters from Buffett that are sometimes interesting, occasionally teach me something and almost always make me smile. I’d miss getting those.
Berkshire, as you know if you’ve followed the company or read any of the recent Munger stories, is highly decentralized, with a minimal headquarters staff. Its subsidiaries such as Geico Insurance and the Burlington Northern railroad pretty much operate without major input from Berkshire’s headquarters in Omaha.
As a result, Munger having passed on isn’t going to make any difference in how Berkshire’s subsidiaries function.
Meanwhile, Buffett, 93, is still in charge, still talkative and still apparently vigorous. One day, of course, he’ll pass from the scene, as we all will sooner or later. But I don’t think his apparent successor Greg Abel will run the company into the ground. And I think that Todd Combs and Ted Weschler, who help Buffett handle Berkshire’s stock portfolio, $318 billion as of Sept. 30, are pretty good at what they do.
So even if selling wouldn’t trigger a significant tax, I’d still consider my Berkshire stake—about 2% of my portfolio—to be a long-term holding.
Berkshire certainly isn’t a perfect company. Far from it. For example, Progressive Insurance—my biggest individual stock holding—perennially kicks butt on Berkshire’s Geico. But that’s never prompted me to sell my Berkshire stake. And Munger’s death doesn’t call to me to sell my Berkshire, either.
What his death did tell me: it was time to sell my small stake in a company that you’ve likely never heard of: the Daily Journal Co. (DJCO) In 2019, I don’t remember how, I stumbled upon Daily Journal, which owns a legal newspaper, and bought five shares for $1,080. I bought it for entertainment value, not investment value.
With Munger gone, the entertainment factor is gone and I had no reason to own the stock, which I sold on Monday.
One Munger asset for which I’ve placed a buy order is the new edition of “Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger,” which comes out Dec. 5. My friend and former boss—and former Yahoo Finance chief—Andy Serwer, wrote in his Munger appreciation in Barron's that the book contains a forward from Buffett and a rebuttal from Munger.
I look forward to reading them—and seeing Charlie, as usual, have the last word.
Allan Sloan, who has written about business for more than 50 years, is a seven-time winner of the Gerald Loeb Award, business journalism’s highest honor. He’s won Loebs in four different categories over four different decades.
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