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No. of Recommendations: 28
I don't find mistakes like this to be very helpful, Apple was a lottery ticket at that time. I find Belridge oil to be a lot more instructive. Charlie did not have the liquid funds to cover the 1500 shares but could have easily borrowed the funds or sold another position to cover the purchase.


At the 2019 Berkshire Hathaway shareholder meeting, Charlie Munger described Belridge Oil as the greatest investing mistake of omission of his life. In 1977, he bought 300 shares of the stock for $115 per share. At the time, Munger described it as the most undervalued stock in the world, with his calculation of intrinsic value finding that the stock was worth somewhere in the thousands of dollars.

Later that year, he was offered the opportunity to buy 1500 shares of the stock at the same price. Munger declined, leery of committing to a stock whose CEO was a dysfunctional drunk (though as Munger later recounted, though the CEO had a drinking problem, the Belridge oil wells didn’t).

In 1979, the Belridge CEO put the company on the auction block for sale in a bidding war between Mobil Corporation, Texaco, and Shell. Ultimately, Shell was the high bidder at a price of $3,665 in cash. Munger near instantly turned a $34,500 investment into $1,099,500. This instantly transformed Munger’s life and put him in the position to become a substantial Berkshire Hathaway shareholder alongside Warren Buffett.

Of course, as Munger recounts, those extra 1500 shares would have turned $172,500 into $5,497,500. If Munger had purchased those Belridge shares and then put it into Berkshire, which was trading at $260 per share, we are talking 21,114 Berkshire Hathaway Class A shares that currently trade for $314,750. Such a maneuver would have added $6 billion to the Munger family’s net worth.

In hindsight, Munger said that what bothered him the most was that he knew Belridge Oil was the most undervalued stock he would ever see in his life, and didn’t maximize the opportunity.
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