- Investors need to own stocks like Apple and Alphabet or they’ll fall behind, Charlie Munger says.
- Warren Buffett’s business partner said Apple was the “logical candidate” for Berkshire Hathaway.
- The 99-year-old investor says he likes the tech titans and regulators shouldn’t break them up.
It’s the Magnificent Seven’s world and we’re all just living in it, according to Charlie Munger.
A handful of mostly technology companies have grown so dominant, and outperformed the stock market to such a great extent in recent years, that investors who don’t own any of them risk being left behind, Warren Buffett’s business partner said in two recent interviews.
“What everybody has learned is that everybody needs some significant participation in the 12 companies that do better than everybody else,” Munger told the Acquired podcast. “You need two or three of them, at least.”
The 99-year-old vice chairman of Buffett’s Berkshire Hathaway conglomerate made the same point to The Wall Street Journal.
“I think that the modern investor, to get ahead, almost has to get in a few stocks that are way above average,” he said.
“They try and have a few Apples and Googles or so on, just to keep up, because they know that a significant percentage of all the gains that come to all the common stockholders combined is going to come from a few of these supercompetitors.”
It’s a little jarring to hear Munger endorse the tech titans, given he’s an old-school value investor who shies away from expensive growth stocks, prizes predictability, and generally sticks to companies he deeply understands like Costco. On the other hand, Apple ranks among the biggest winning bets for Berkshire in recent years.
The pair plowed over $30 billion into the iPhone maker between 2016 and 2018, and Apple’s stock price has more than tripled since then. Berkshire now owns a nearly 6% stake worth about $157 billion, meaning the consumer-electronics giant accounts for almost half the value of its entire stock portfolio. Apple shares have also surged by about 40% this year, dwarfing the S&P 500’s 14% gain.
Munger told the Acquired podcast that when it came to buying into Big Tech, “Apple was the logical candidate” for Buffett and him, in part because its stock was trading cheaply at the time.
As for Buffett, he’s explained the wager by pointing to Apple’s powerful brand, underscoring how indispensable its devices are to customers, praising CEO Tim Cook as an exceptional leader, and saying it’s a better business than any that Berkshire owns.
Buffett’s right-hand man shrugged off one of the key concerns about Big Tech, a potential need for regulation, during his WSJ interview.
“I would not break them up,” he said. “They’ve got their little niches. Microsoft maybe has a nice niche, but it doesn’t own the Earth.”
“I like these high-tech companies,” he continued. “I think capitalism should expect to get a few big winners by accident.”
Munger seems to believe the stock market has become a “winners take all” arena, where a few big companies crush their rivals and rack up outsized gains. He’s apparently a fan of these dynamos and sees nothing wrong with their dominance.
Reluctantly or not, the nearly century-old investor has embraced the world-beaters of today, and doesn’t see avoiding them as a viable option. His message to holdouts appears to be: Change with the times or get left in the dust.
