Charlie Munger reflects on one investment Warren Buffett passed up — Costco

Published Sat, Nov 4 20236:29 AM EDT

Warren Buffett and his longtime business partner Charlie Munger almost never butt heads, but there has been one rare area of disagreement between the two investment legends. The 99-year-old Munger has been a loyal, stalwart supporter of Costco Wholesale Corp., calling it one of the best investments of his life — and vowing to never sell a single share. But the 93-year-old "Oracle of Omaha" was never really convinced that the membership-only, big-box store could be a home run. Speaking in an hourlong interview on the Acquired podcast this week, Munger revealed he had invested in the retailer before it merged with Price Club in 1993, and joined the board in 1997 after Buffett declined former Costco CEO James Sinegal's offer to be an independent director. Munger, who calls himself a "total addict" to Costco, shared that he tried convincing Buffett to join him in investing in the wholesale club, but the Berkshire Hathaway CEO didn't bite the bullet, at least not in a significant way. "Warren wouldn't do it. Warren doesn't like retail," Munger said during the podcast. "Practically everything that was once mighty in retail is gone. Sears Roebuck is gone. The big department stores are gone. It's just too damn difficult, as far as he's concerned." Munger, Buffett's righthand man, said he's a big fan of Costco's membership business, rewards program as well as its big, efficient stores and consistently strong management. He believes Costco will eventually become a huge internet player, threatening Amazon in the process. "They really did sell cheaper than anybody else in America," Munger said. "It takes a lot of good execution to do it. You really have to set out to do it and then do it with enthusiasm every day, every week, every year for 40 years. It's not so damned easy." Munger owned 188,000 shares of Costco as of October, according to FactSet. Costco has grown from less than $5 a share in the early 1980s to more than $560 a share today. Berkshire had previously held a 1% stake in Costco, but the owner of Geico insurance and the BNSF railroad, exited the position in 2020. The conglomerate is no stranger to retailers, but its wholly- owned ones tend to be specialty stores or well-recognized brands, such as Borsheim's Fine Jewelry , See's Candies and Dairy Queen. 'Shoot me first' As Munger's obsession over Costco grew stronger over the years, Buffett learned to make lighthearted jokes about it. During 2011's Berkshire's annual meeting , Buffett made up a scenario about plane hijackers asking about his and Munger's last requests on earth. "The hijackers picked us out as the two dirty capitalists that they really had to execute," he said. "They didn't really have anything against us, so they said that each of us would be given one request before they shot us." "Charlie said, 'I would like to give, once more, my speech on the virtues of Costco — with illustrations.' The hijacker said, 'Well, that sounds pretty reasonable to me.' He turned to me and said, 'And what would you like, Mr. Buffett?' And I said, 'Shoot me first,'" Buffett said, sparking a wave of laughter from the audience. Buffett admitted that he could be wrong about Costco, just like when he made the mistake of trimming Berkshire's stake in Apple a few years ago. "I could only do so many things that I get away with Charlie. I kind of used them up between Costco and Apple," Buffett once said. "He probably very likely was right in both circumstances."