Charlie Munger: Diversification

“The whole secret of investment is to find places where it’s safe and wise to non-diversify. It’s just that simple. Diversification is for the know-nothing investor; it’s not for the professional.”—Charlie Munger.

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Charlie Munger: Profit sitting in the yard

“We tend to prefer the business which drowns in cash. It just makes so much money that one of the main principles of owning it is you have all this cash coming in. There are other businesses, like the construction equipment business of my old friend John Anderson. And he used to say about his business ‘You work hard all year, and at the end of the year there’s your profit sitting in the yard.’ There was never any cash. Just more used construction equipment. We tend to hate businesses like that.”
–Charlie Munger.

Charlie Munger: Rare person

“If the business is good enough, it will carry a lousy manager. And the converse case, where a really good manager gets in a really lousy business, he’ll ordinarily have a very imperfect record. In other words, it’s a rare person that can take over a textile business, totally doomed—which is what Warren [Buffett] did in his youthful folly— and turn it into what’s happened here. You should not be looking for other Warrens on the theory they’re under every bush.” –Charlie Munger.

Charlie Munger: Comparative process

“When you’re trying to determine something like intrinsic value and margin of safety and so on, there’s no one easy method that could be simply mechanically applied by, say, a computer and make anybody who could punch the buttons rich. By definition, this is going to be a game which you play with multiple techniques and multiple models, and a lot of experience is very helpful. I don’t think you can become a great investor very rapidly any more than you could become a great bone tumor pathologist very rapidly. It takes some experience and that’s why it’s helpful to get a very early start…. We’ve never had any system for being able to make correct judgments on the values of all businesses. We throw almost all decisions into the too hard pile, and we just sift for a few decisions that we can make that are easy. And that’s a comparative process. And if you’re looking for an ability to correctly value all investments at all times, we can’t help you.”

—Charlie Munger.