Alex Morris on Buffett and Munger Unscripted, $MSFT, $META, $GOOG, $AAPL Big Tech Cap Ex | S07 E04
Feb 3, 2025
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In this discussion, Alex Morris, author of "Buffett and Munger Unscripted," shares his insights into the investment strategies of Warren Buffett and Charlie Munger. He explores the evolution of value investing literature and the significance of capital allocation. The conversation delves into the shift in tech companies' capital expenditures, especially around AI, and highlights Berkshire Hathaway's unique approach to capital allocation. Additionally, Morris discusses trends in the alcohol industry, emphasizing changing consumer behaviors and investment dynamics.
Alex Morris emphasizes the transformative power of investment literature, particularly Buffett and Munger's philosophies, in shaping new investors' strategies.
Capital allocation is crucial for investment success, with effective timing and method significantly impacting a company's growth potential.
Balancing analytical decision-making and intuitive insights is essential in fund management, as experience enriches instinct and personal biases must be acknowledged.
Deep dives
The Importance of Investment Education
The conversation centers around how investment literature can shape successful strategies and decision-making, particularly emphasizing the influence of Warren Buffett's and Charlie Munger's philosophies on new investors. Alex Morris shares insights from his new book 'Buffett and Munger Unscripted,' which acts as a guide to their annual meetings and teaches readers about lasting investment principles. He highlights that his personal journey as an investor was significantly shaped by reading previous essays by Larry Cunningham on Buffett's wisdom, underscoring the lasting value of investing education. The book aims to distill key themes from the meetings into a digestible format, maintaining relevance for both novice and seasoned investors alike.
Navigating Capital Allocation
A significant focus of the discussion revolves around the nuances of capital allocation—how Warren Buffett and Charlie Munger strategically deploy capital within their investment portfolios. Alex discusses the importance of understanding a company’s ability to return capital to its shareholders, noting that effective capital allocation can result in massive business growth, as exemplified by investments in companies like Apple and their historical capital management transitions. The dialogue emphasizes that an astute understanding of capital allocation, both in terms of timing and amount, is essential for investment success. By fostering a clear decision-making approach, the two investors have effectively navigated complex markets to identify lucrative opportunities.
Learning from Past Investments
The conversation delves into key historical investments, specifically highlighting Berkshire Hathaway's notable moves such as PetroChina and Apple, which illustrate shifts in investment philosophy. Alex mentions how Buffett initially entered the PetroChina deal at a price considerably lower than its competitors, showcasing a keen eye for undervalued assets and aligning with long-term capital deployment strategies. There is a strong discussion regarding the evolution of thinking surrounding investments, including how initial skepticism can shift to monumental confidence as companies like Apple prove their worth over time. This serves to highlight how historical context and adaptability influence investment outcomes.
The Role of Intuition in Fund Management
An engaging segment of the conversation discusses the balance between data-driven decision-making and intuitive insights within the realm of fund management. Alex references a master's thesis that argues successful fund managers synthesize both analytical rigor and gut feelings refined through experience. The narrative reinforces that intuition is not a mystical quality, but rather a developed skill honed by exposure to market cycles and various investing environments. The importance of acknowledging personal biases in decision-making and balancing instincts against data is emphasized as essential for successful investment strategies.
Evolving Business Models and Their Impacts
The discussion highlights how changing consumer behavior and new business dynamics impact traditional consumer brands and how companies must adapt to thrive. There are insights regarding the increasing competition in categories like energy drinks and spirits, questioning whether older brands can maintain their relevance in a market oversaturated with new entrants. Alex elaborates on the innovative approaches that companies like Costco utilize to disrupt the traditional brand loyalty paradigm, suggesting that modern consumers are shifting towards cost-effectiveness and quality over brand names. Ultimately, this segment underscores the need for companies to be agile in order to capture market share amidst rapidly changing consumer preferences.
Value: After Hours is a podcast about value investing, Fintwit, and all things finance and investment by investors Tobias Carlisle, and Jake Taylor. See our latest episodes at https://acquirersmultiple.com/podcast
We are live every Tuesday at 1.30pm E / 10.30am P.
About Jake
Jake's Twitter: https://twitter.com/farnamjake1
Jake's book: The Rebel Allocator https://amzn.to/2sgip3l
ABOUT THE PODCAST
Hi, I'm Tobias Carlisle. I launched The Acquirers Podcast to discuss the process of finding undervalued stocks, deep value investing, hedge funds, activism, buyouts, and special situations.
We uncover the tactics and strategies for finding good investments, managing risk, dealing with bad luck, and maximizing success.
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ABOUT TOBIAS CARLISLE
Tobias Carlisle is the founder of The Acquirer’s Multiple®, and Acquirers Funds®.
He is best known as the author of the #1 new release in Amazon’s Business and Finance The Acquirer’s Multiple: How the Billionaire Contrarians of Deep Value Beat the Market, the Amazon best-sellers Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014) (https://amzn.to/2VwvAGF), Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012) (https://amzn.to/2SDDxrN), and Concentrated Investing: Strategies of the World’s Greatest Concentrated Value Investors (2016) (https://amzn.to/2SEEjVn). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law.
Prior to founding the forerunner to Acquirers Funds in 2010, Tobias was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer. As a lawyer specializing in mergers and acquisitions he has advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam.
He is a graduate of the University of Queensland in Australia with degrees in Law (2001) and Business (Management) (1999).
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