Dec 1, 2023
How smart do you have to be to invest in stocks? According to the late Charlie Munger, Warren Buffett’s business partner, not very.
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent,” he once said, according to Janet Lowe’s 2003 biography of Munger, “Damn Right!”
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Put simply, Munger didn't look for the home run investment or the next big thing. Instead, he focused on buying simple businesses for less than they were worth and holding on for the long term.
It’s a simple strategy. Instead of being trying to be clever, be patient.
With that in mind, here are three stocks that resonate with Munger-style patience.
D.R. Horton
Homebuilders recently got a vote of confidence from Buffett himself after the Oracle of Omaha added a few homebuilder stocks to his portfolio, including D.R. Horton (DHI). He seems to be betting on a boom in home construction, which could be justified by the ongoing shortage of housing across North America.
According to a March report from Realtor.com, the U.S. housing market is short 6.5 million single-family units due to a deade of under-building. This gap could begin to close if more households opt for multi-family units and more construction gets underway. That’s where companies like D.R. Horton step in.
Meanwhile, the stock is undervalued—trading at around 10 times earnings per share. Consider placing this cheap, Buffett-backed stock on your radar for a long-term investment.
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Eli Lilly
Pharmaceutical giants are usually good long-term bets. That’s because once a drug or treatment from their pipeline is approved, it can generate revenue and profits for decades. Eli Lilly (LLY) recently received approval for Mounjaro, a drug it intends to deploy in the weight loss market. Effectively, the company has entered into competition with Ozempic, which is one of Danish drugmaker Novo Nordisk’s products.
This market could be worth $71 billion by 2032, according to a report by J.P. Morgan stock analyst Richard Vosser cited by Fierce Pharma, with Eli Lilly capturing a significant chunk of it.
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That’s just one drug in a broad portfolio. Eli Lilly already has a track record of steady growth and investment in research and development. As a result, the stock has delivered a total return of more than 1,000% over the past 10 years.
An impressive history and promising future should put this stock on your long-term watch list.
Microsoft
Savvy investments and early moves have put Microsoft (MSFT) at the forefront of developments in artificial intelligence. And the company already has a significant stake in the most promising startup in this field: OpenAI.
OpenAI’s products, like ChatGPT, have already been integrated into Microsoft’s software suite. The tech giant also recently secured a nonvoting seat on the startup’s board.
Microsoft recently expanded this advantage by building its own custom AI chip.
It’s too early to say what impact AI will have on our economy in the future. But it seems increasingly likely that Microsoft will play a pivotal role in this future. That’s why long-term investors may want to consider adding this stock to their “forever” watch list.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
