‘Things were a lot tougher’: Charlie Munger has a blunt message for whiners worried about ‘toughness’ Here are the stocks that keep Warren Buffett’s right-hand man happy during tough times
It may be a new year, but not everyone is excited for what 2023 will bring. Stock prices have fallen, economic growth appears to be slowing and inflation remains rampant.
But Warren Buffett’s right-hand man, Charlie Munger, suggests that we should actually be happier with our current situation.
“People are less happy about where things are now than they were when things were a lot harder,” Munger said earlier this year.
“It’s strange for someone my age because I was in the middle of the Great Depression when the need was unbelievable.”
Best known as vice chairman of Berkshire Hathaway and a longtime business partner of Buffett, Munger also serves as chairman of the Daily Journal, a newspaper publisher with a sizable stock portfolio of its own.
So if you’re hoping that some of Munger’s outspoken realism will rub off on you this year, why not borrow some of his investing advice too? If these three stocks can keep the 98-year investment veteran happy, they might work for you, too.
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Bank of America
The Daily Journal held 2.3 million shares of Bank of America (NYSE: BAC) stock at the end of September, worth about $69.46 million at the time. With 42.49% of the portfolio, the bank is the largest publicly traded holding in Munger’s company.
Given the economic turmoil forecast for the coming year, it’s a smart position for Munger. While many sectors fear rising interest rates, the banks are looking forward to it. That’s because banks lend money at higher rates than they borrow and then pocket the difference.
When interest rates rise, the dispersion of a bank’s profits widens.
And coincidentally, Bank of America has steadily increased its payout to shareholders.
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In July, Bank of America increased its quarterly dividend by 5% to 22 cents a share — and that’s after the company’s 17% dividend increase in July 2021.
At the current share price, the bank offers a 2.7% annual yield.
Buffett also likes the company, as Bank of America is Berkshire Hathaway’s second-largest holding.
Wells Fargo
With approximately $1.9 trillion in assets, Wells Fargo (NYSE:WFC) is another major player in America’s financial services industry. It serves one in three households in the US and more than 10% of small businesses in the country.
The Daily Journal owned 1.59 million shares of Wells Fargo as of Sept. 30, making the bank its second-largest public company with a 39.16% weighting.
According to the company’s most recent earnings report, Wells Fargo had revenue of $19.5 billion in the third quarter, up 4% year over year. Earnings for the quarter were 85 cents a share, down from $1.17 a share at the same time last year.
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While the economy faces uncertainties, management remains optimistic.
“Wells Fargo is well positioned as we continue to benefit from higher rates and continued disciplined cost management,” Wells Fargo CEO Charlie Scharf said in a statement.
“Both retail and business customers remain in strong financial health and we continue to see historically low delinquencies and high payment rates across our portfolios.”
Wells Fargo has a quarterly dividend rate of 30 cents per share, which translates to a 2.9% annual yield.
Alibaba Group
Chinese tech stocks haven’t been the market’s darlings of late. E-commerce giant Alibaba Group, for example, plummeted 26% in 2022 and has declined more than 60% over the past two years.
But the Daily Journal has retained the company as its third-largest holding. As of September 30, the company owned 300,000 shares of Alibaba — a stake worth $24.0 million at the time.
And the downturn in Alibaba stock could give contrarian investors pause.
In the third quarter, the Chinese tech company grew its revenue 3% year over year to $29.1 billion.
Management noted that the company achieved this revenue growth despite “the impact on consumer demand from the resurgence of COVID-19 in China, as well as the slowdown in cross-border trade due to rising logistics costs and foreign currency volatility.”
While Alibaba doesn’t pay a dividend, it does return cash to shareholders through its share buyback program.
As of Nov. 16, the company has repurchased approximately $18 billion of its own stock as part of its existing $25 billion stock repurchase program.
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This article is informational only and should not be construed as advice. It is provided without any guarantee.