Warren Buffett hailed the colossal contribution of his long-term partner Charlie Munger following his passing. But there appears to be plenty of life remaining for Berkshire Hathaway stock amid solid gains so far in 2023.
Berkshire has a formidable portfolio of wholly owned companies and common stock holdings as well as a gargantuan pile of cash, which should help it weather potential storms as it looks to bolster its year-to-date gain of around 16%.
Munger Passing Shouldn't Have 'Materially Adverse Impact'
CFRA Research Vice President Cathy Seifert believes Berkshire Hathaway has enough talent on its bench to cope with the loss of Munger.
"While we believe Berkshire shareholders have benefited from the years of wise (and often unvarnished) counsel he provided the firm and Chairman Warren Buffett, we do not expect his passing to have a materially adverse impact on BRK shares, and we reiterate our buy recommendation," she said in a note to clients.
Nevertheless, Seifert also believes Munger's passing will be a "significant loss to the Berkshire culture and to Warren Buffett." She also thinks it could test the transition plans put in place by the company several years ago.
In addition, Seifert pointed out that the company has two other vice chairmen, Greg Abel and Ajit Jain. Munger previously hailed the hiring of India-born Jain, who heads the firms insurance operations, as "our best investment at Berkshire." The firm also boasts highly rated investment managers Todd Combs and Ted Weschler.
Nevertheless, investors may be concerned about the fact Munger is the latest leader from the firm to die in recent years.
Director Walter Scott died in September 2021 at age 90, Thomas S. Murphy died at the age of 96 just months after stepping down from the board in February 2022. Director David Gottesman passed away at the age of 96 in September 2022.
Tributes Flow In For Business Colossus Charlie Munger
The news emerged Tuesday that Berkshire Vice Chairman Munger had passed away at the age of 99. The firm said in a missive that he had died "peacefully" at a California hospital.
The death of Charlie Munger, a polymath who was talented in an array of fields, is undoubtedly a massive loss for the investing community.
His close friend and partner Warren Buffett led the tributes to the man who helped turn him away from "cigar butt" investing to looking for top-quality companies at fair prices.
"Berkshire Hathaway could not have been built to its present status without Charlie's inspiration, wisdom and participation," the Berkshire CEO said in a news release.
That is certainly the case. It was Munger who persuaded the Oracle Of Omaha to stump up the cash to purchase See's Candies in the early 1970s for what Buffett later dubbed a "fancy price." Munger's belief that buying a very good business would pay off in the long run due to its ability to generate superior profits turned out to be true, netting billions for Berkshire.
Munger's BYD Buy Pays Off For Berkshire Stock
A more recent example of his success was the 2008 purchase of EV stock BYD. In an interview earlier this year, Munger said the initial $270,000 investment was now worth $8 billion to $9 billion. At the low end of the scale, that is a return of 2,962,863%.
"I would say that I've never helped do anything at Berkshire that was as good as BYD — and I only did it once," he said.
BYD Americas President Stella Li hailed Munger following his death, saying his "unwavering support and guidance were instrumental in shaping BYD into the global clean-energy leader it is today."
The search for quality also led to Berkshire becoming a major Apple shareholder. Apple CEO Tim Cook took to X, formerly Twitter, to pay tribute to Munger.
"A titan of business and keen observer of the world around him, Charlie Munger helped build an American institution, and through his wisdom and insights, inspired a generation of leaders," Cook said.
Pershing Square Capital Management CEO Bill Ackman also hailed his fellow investing behemoth, saying he "confronted us with the most powerful direct truths and educated us about character, psychology, morality, judgment, wisdom, investing and more."
Ultimate Warren Buffett Stock Eyes Entry
Berkshire Hathaway stock has formed a new cup base with an ideal entry point of 373.74, according to MarketSmith analysis. A lower handle entry is also in the works.
BRKB has retaken its 50-day moving average, an encouraging sign. The key benchmark had been acting as an area of resistance.
Back in September it reached record highs after getting extended from a cup-with-handle buy point of 331.84.
All-around performance is very good for Berkshire Hathaway stock, which is reflected in its IBD Composite Rating of 92 out of 99.
Earnings have grown by an average 22% over the past three quarters. Investor's Business Daily recommends investors look for companies with average EPS growth of at least 25% over that time period.
The relative strength line has been slipping after hitting a 52-week high in September. But BRKB's Relative Strength Rating of 82 means it has outperformed 82% of stocks in terms of price performance over the past 12 months. The stock is up about 16% so far in 2023 while the S&P 500 has risen 19%.
Under the watchful eye of investing mastermind Warren Buffett, Berkshire also amassed a formidable balance sheet and a considerable cash pile. That war chest rose to record levels in the most recent quarter, coming in at $157.24 billion, up from the previous quarter's $147.4 billion.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
