When Buffett's Right Hand Bet Everything on Just Three Stocks—Here's What Happened

The Contrarian Who Rejected Diversification

Charlie Munger, Warren Buffett’s legendary partner at Berkshire Hathaway, was infamous for one thing: his unwavering conviction in concentrated investments. At a 2017 conference, he revealed a stunning truth about his own portfolio—nearly his entire $2.6 billion net worth sat in just three investments.

This wasn’t recklessness. Munger actively dismissed diversification as “a rule for those who don’t know anything,” a view that echoed Buffett’s own assertion that spreading capital across dozens of holdings “makes very little sense for anyone that knows what they’re doing.” For Munger, who had steered his own investment fund to deliver 19.5% average annual returns from 1962 to 1975—crushing the Dow Jones Industrial Average by nearly four times over—this wasn’t philosophy. It was the operating manual of a master.

After Munger’s passing in November 2023, Buffett eulogized him as Berkshire’s “architect,” crediting him with transforming the entire investing approach from scrappy value hunting to acquiring “wonderful businesses at fair prices.” The question that followed was inevitable: How have those three high-conviction bets actually performed?

Investment #1: Costco—The “Total Addict” Play

Munger served on Costco Wholesale’s board for decades and made no bones about his devotion. “I’m a total addict,” he declared, and in 2022, he pledged never to sell a single share. At that moment, his position exceeded 187,000 shares worth approximately $110 million, making him the second-largest shareholder.

The past two years have vindicated that faith. Since November 2023, Costco shares have surged 47%. Beyond price appreciation, the company hiked its dividend by 27% and distributed a special $15-per-share dividend in January 2024—yielding an additional 2.3% return by itself.

Investment #2: Himalaya Capital—Betting on Li Lu’s Value Thesis

In the early 2000s, Munger deployed $88 million into Himalaya Capital, founded by Li Lu, often described as the “Chinese Warren Buffett” for his disciplined application of value investing principles. Munger’s faith was rewarded spectacularly, with returns he himself labeled “ungodly.”

While Himalaya remains private and doesn’t publicly disclose full performance, its portfolio tells a revealing story. Alphabet (Google’s parent company), which represented nearly 40% of assets under management in the most recent regulatory filing, has rocketed 130% since Munger’s death. Berkshire Hathaway holdings within the fund have also delivered solid gains during this window.

Investment #3: Berkshire Hathaway—The Concentration Gamble

Here lies the most striking reveal: Berkshire Hathaway accounted for nearly 90% of Munger’s $2.6 billion net worth at the time of his death. Yet this figure undersells his actual conviction. Records show that in 1996, Munger owned 18,829 Class A shares. He subsequently sold or donated approximately 75% of that stake. Had he maintained his original position, his net worth would have balllooned to an estimated $10 billion.

Still, his remaining 4,033 Class A shares—worth roughly $2.2 billion—have appreciated 37% in the two years since his passing.

The Verdict: Conservative Winners in Uncertain Times

Two years and one month after Munger’s death, the arithmetic is instructive. Berkshire Hathaway Class A shares have climbed 38%, while Costco has jumped 47%. The broader S&P 500, by contrast, has jumped 52%—meaning Munger’s concentrated portfolio slightly lagged the market. Himalaya’s true performance remains opaque, though its top holdings suggest double-digit returns.

Yet this apparent underperformance masks a deeper truth. Munger’s three picks—companies with fortress-like competitive advantages and transparent fundamentals—carried considerably less volatility and risk than the broader market. For a conservative architect of wealth like Munger, that trade-off was likely acceptable.

More provocatively, the ability of value-oriented businesses to post double-digit gains during a stretch when value investing has been deeply out of favor suggests Munger’s investment philosophy remains as durable as ever. The stocks have changed, but the timeless principles endure.