If Warren Buffett Had Used This Common Practice, Charlie Munger Says Berkshire Hathaway's Value Could Have Doubled: 'The Reason We Didn't Is…'
Portfolio Pulse from Benzinga Neuro
Charlie Munger, the late former Vice Chairman of Berkshire Hathaway, stated that the company could have doubled its value by using leverage in its investments, a strategy they avoided to protect shareholders. Munger acknowledged that while leverage could have significantly increased Berkshire's worth with minimal risk, the potential disappointment to shareholders, particularly in a scenario where a large portion of their investment could be lost, was a deterrent. He also noted that Berkshire did use some leverage through its insurance float. Berkshire Hathaway shares closed slightly higher on Thursday.
December 01, 2023 | 3:34 am
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NEUTRAL IMPACT
Charlie Munger's comments on potential past use of leverage by Berkshire Hathaway could create a sentiment of missed opportunity among investors, but also reinforce the company's conservative approach to risk management.
While the revelation from Munger could lead to some investors reevaluating Berkshire's past strategies, the company's current valuation and stock price are unlikely to be affected in the short term as the comments reflect a hypothetical scenario rather than a change in current or future strategy.
CONFIDENCE 90
IMPORTANCE 60
RELEVANCE 80
NEUTRAL IMPACT
Charlie Munger's reflections on not using leverage may have a neutral impact on Berkshire Hathaway Class B shares, as the company's conservative strategy is well-known and the comments do not indicate any future change.
The impact on BRK.B shares is expected to be neutral in the short term, as Munger's comments are retrospective and do not suggest a shift in Berkshire's investment strategy, which is a key factor for current and potential investors.
CONFIDENCE 90
IMPORTANCE 60
RELEVANCE 80