How Warren Buffett's Partner Built a Concentrated Portfolio That Defies Conventional Wisdom

When Charlie Munger, the longtime partner and vice chairman of Berkshire Hathaway, passed away in November 2023, the investing world lost one of its most unconventional minds. But his legacy extends far beyond his decades-long collaboration with Warren Buffett—it lives in the portfolio he left behind, a masterclass in the power of conviction over diversification. With a net worth of approximately $2.6 billion concentrated in just three investments, Munger demonstrated that sometimes the best strategy is to know what you’re doing and commit fully to it.

“Diversification is a crutch for those who don’t know anything,” Munger once declared at a 2017 conference, a philosophy his partner Warren Buffett echoed when he noted that diversification makes “very little sense for anyone who knows what they’re doing.” It wasn’t arrogance—it was earned wisdom. Before joining forces with Buffett at Berkshire Hathaway, Munger ran his own investment fund that generated average annual returns of 19.5% from 1962 to 1975, nearly four times better than the Dow Jones Industrial Average. Both men shared a relentless pursuit of companies with “moats”—competitive advantages so entrenched that they could maintain pricing power and profitability regardless of market conditions.

The Philosophy Behind Munger’s Concentrated Approach

The contrast between Munger’s strategy and typical institutional investing couldn’t be starker. While most portfolios aim for broad diversification to reduce risk, Munger doubled down on his deepest convictions. This wasn’t recklessness; it was the deliberate choice of someone with decades of track record and an almost surgical ability to identify undervalued assets purchased at reasonable prices. His approach represented what he and Warren Buffett called the shift toward buying “wonderful businesses at fair prices”—a refinement of pure value hunting that emphasized quality alongside valuation.

By the time Munger passed away, his concentrated approach had proven prescient. His partnership with Warren Buffett created a symbiotic relationship where Munger’s discipline and contrarian perspective balanced Buffett’s already formidable instincts. Together, they transformed Berkshire Hathaway from a struggling textile company into one of the world’s most valuable enterprises.

Costco Wholesale: The Retail Conviction That Never Wavered

Munger served on the board of Costco Wholesale for decades, and his affection for the company bordered on obsessive. “I’m a total addict,” he once confessed, and in 2022, he professed to “love everything about Costco” while vowing never to sell a single share. At that time, he held over 187,000 shares worth approximately $110 million, making him the company’s second-largest shareholder.

In the roughly two years since Munger’s death in November 2023 through early 2026, Costco shares have delivered 47% in returns—impressive performance that reflects the company’s resilience and pricing power. But the gains extended beyond price appreciation. Costco raised its dividend by 27% and paid a special $15-per-share dividend in January 2024, representing a 2.3% yield on its own. These actions underscore why Munger loved the company: it possessed a durable competitive moat based on its membership model and operational efficiency, allowing it to reward shareholders consistently even in uncertain times.

Himalaya Capital: Trusting Li Lu’s Value Investing Discipline

In the early 2000s, Munger deployed $88 million of his wealth to Li Lu, the founder of Himalaya Capital, widely known as the “Chinese Warren Buffett” for his disciplined application of value investing principles to emerging markets. Li Lu’s fund explicitly follows the value investing philosophy established by Buffett, Munger, and Benjamin Graham—emphasizing long-term wealth creation over short-term trading gains.

Munger’s confidence proved justified. His initial $88 million investment multiplied significantly, leading him to praise Li Lu’s results as generating “ungodly returns.” While Himalaya Capital, as a private hedge fund, doesn’t publicly disclose its performance, its largest holding—Alphabet (Google’s parent company)—comprised nearly 40% of the fund’s assets and has surged 130% since Munger’s death. The fund’s secondary holdings, including Berkshire Hathaway itself, also performed solidly, suggesting that Munger’s delegation to a trusted value investor with complementary skills had proven sound.

Berkshire Hathaway: The Anchor of Munger’s Wealth

The most striking aspect of Munger’s portfolio is how heavily it tilted toward his own company. At the time of his passing, he owned 4,033 Class A shares worth roughly $2.2 billion—nearly 90% of his total net worth. This concentration appears even more dramatic when you consider what might have been: had Munger retained the 18,829 Class A shares he held in 1996 (instead of selling or donating approximately 75% of them), his net worth would have reached an estimated $10 billion.

That decision to gradually reduce his Berkshire stake speaks to Munger’s pragmatism and his desire to deploy capital elsewhere. Yet his remaining 4,033 shares appreciated by 37% from November 2023 through early 2026, a solid performance that highlights Berkshire’s role as a stable wealth accumulator for long-term holders.

The Verdict: What the Numbers Reveal About Patient Capital

Two years and one month after Munger’s death, the results of his concentrated portfolio tell a nuanced story. Costco shares returned 47%, while Berkshire Hathaway Class A shares returned 37% to 38%. Himalaya Capital’s top holdings suggest strong double-digit performance. Yet these gains, while respectable, fell slightly short of the S&P 500’s 52% return during the same period.

However, this comparison misses a crucial point that likely appealed to a conservative investor like Munger. While absolute returns matter, they tell only part of the story. Costco and Berkshire Hathaway are businesses with sterling fundamentals, exceptional management, and durable competitive advantages—characteristics that typically translate to lower volatility and greater resilience during market downturns. In an era when value investing has faced headwinds and trendy growth stocks have dominated headlines, Munger’s portfolio demonstrated that solid businesses with strong operational principles can deliver attractive returns even when out of favor.

The philosophy that guided Warren Buffett’s partner throughout his career—focusing deeply, investing with conviction, and seeking wonderful businesses at fair prices—remains as relevant today as ever. His concentrated portfolio serves as a reminder that sometimes the most sophisticated investment strategy is also the simplest: identify what you truly understand, believe in its durability, and commit with full conviction.