Charlie Munger's Three-Pillar Portfolio: A Two-Year Performance Check After His Passing

The Philosophy Behind Extreme Concentration

Warren Buffett’s longtime partner Charlie Munger rejected the conventional wisdom that investors should spread their capital across numerous holdings. Instead, he embraced what many would call reckless concentration: placing nearly his entire $2.6 billion fortune into just three bets. Yet Munger called diversification a “rule for those who don’t know anything”—a statement that mirrored Buffett’s own skepticism about portfolio sprawl for knowledgeable investors.

This wasn’t mere arrogance. Before joining Berkshire Hathaway, Munger operated his own investment fund that delivered average annual returns of 19.5% between 1962 and 1975—nearly four times the Dow Jones Industrial Average’s performance. When Munger passed away in November 2023, Buffett credited him as the intellectual architect of modern Berkshire, transforming their investment approach from hunting deep-value bargains to acquiring “wonderful businesses at reasonable prices.”

Investment No. 1: The Costco Conviction

For decades, Munger served on the board of the warehouse retailer Costco Wholesale and openly declared himself “a total addict” of the business model. By 2022, his devotion was unwavering: he claimed to “love everything about Costco” and promised never to sell his stake—then valued at roughly $110 million across 187,000+ shares.

The market’s verdict over the subsequent two years has been affirming. Costco shares delivered a 47% return since Munger’s death, while the company increased its dividend payout by 27%. Additionally, shareholders received a special $15-per-share dividend in January 2024, which alone represented a 2.3% yield. This steady appreciation underscores the appeal of owning what Munger considered a “moat”—a defensible competitive advantage that sustains profitability across various economic conditions.

Investment No. 2: Himalaya Capital and the Li Lu Partnership

In the early 2000s, Munger delegated $88 million to Li Lu, a hedge fund manager sometimes called “the Chinese Warren Buffett” for his disciplined application of value investing principles. Through Himalaya Capital, Li Lu manages a concentrated portfolio aligned with the frameworks of Buffett, Munger, and Benjamin Graham.

Munger’s confidence proved justified. He frequently praised the fund’s returns as “ungodly,” though Himalaya Capital, being a private vehicle, doesn’t publicly disclose detailed performance. However, examining its largest holding reveals much: Alphabet (Google’s parent company) constituted nearly 40% of the fund’s managed assets as of the most recent quarterly filing and has surged 130% since Munger’s passing. Berkshire Hathaway, another major position, also contributed solidly to this two-year period’s gains.

Investment No. 3: The Berkshire Bet

The most striking aspect of Munger’s wealth distribution was his overwhelming exposure to Berkshire Hathaway. With approximately $2.2 billion of his $2.6 billion net worth concentrated in roughly 4,033 Class A shares at the time of his death, Berkshire represented nearly 90% of his portfolio.

This extreme concentration might seem counterintuitive until you consider Munger’s earlier decisions. Records show he sold or gave away roughly 75% of the 18,829 Class A shares he owned in 1996. Had he retained those holdings, his net worth would have approached $10 billion—a staggering opportunity cost that illustrates both the power and peril of concentrated positions. Nonetheless, his remaining Berkshire stake has appreciated 37% in the two years since his passing.

The Bigger Picture: Risk Versus Return

Since Munger’s death in late November 2023, his three flagship holdings have delivered mixed results relative to the broader market. Berkshire Hathaway Class A shares and Costco have climbed 38% and 47%, respectively, while the S&P 500 has risen 52%. Himalaya Capital’s precise returns remain undisclosed, but its top holdings suggest double-digit performance throughout the period.

The headline: Munger’s concentrated bets haven’t outpaced the market indices. Yet this overlooks a critical dimension of investing philosophy. Munger gravitated toward businesses with entrenched fundamentals—companies capable of generating consistent returns regardless of economic headwinds. In an environment where value stocks have generally lagged growth-driven rallies, the resilience of his three holdings suggests that the investment principles Munger lived by remain enduring, even in his absence.

His legacy isn’t measured solely by short-term alpha but by the durability of choice—companies he believed could compound wealth for decades.