Warren Buffett’s business partner Charlie Munger invests in Australian firm Stonehouse Corporation
“If you are relentlessly rational, you don’t make many mistakes other people make.”
“It seems so obvious. You think everyone is ready to stay rational, but of course they are not, the world is full of fools.
Mr Munger, 98, is the vice chairman of Berkshire and close business partner of the world’s most famous investor, Warren Buffett. Mr. Munger has an estimated net worth of around $2 billion, according to Forbes.
Berkshire’s listed market capitalization is approximately $600 billion and its total assets are nearly $1 trillion, including companies such as Apple, American Express, Bank of America, Chevron, Coca- Cola, Kraft Heinz and General Motors.
Mr Munger said there were more opportunities for Stonehouse to acquire businesses in Australia than in the crowded US market, where competition for takeovers is intense between venture capital, private equity conglomerates and investment such as Berkshire.
Mr Munger said he hoped his public association with Mr Jennings would help put Stonehouse on the radar of future sellers of private and family businesses in Australia.
“Berkshire often buys something because the seller wants a good home and knows that Berkshire will be a good place for their employees who transfer with the company to be treated fairly,” Munger said.
“Jennings works the same way. He is looking for a good home for these Australian companies.
“It’s Berkshire’s playbook again.”
“You can see where I recognize soul mates.”
Stonehouse has owned just three companies since Mr Jennings founded the investment holding company in 2012. They are Goldners Horse Transport, manufacturer and distributor of portable EvaKool coolers and Prestige Plants, a supplier of cooling facilities. high quality in Australia.
Prior to being acquired by Stonehouse, the three subsidiaries were typically family businesses struggling with corporate succession and ownership exits.
Mr Munger said the audited accounts of Stonehouse companies were “ridiculously good”.
“He owns radically different businesses, which is like Berkshire,” Mr. Munger said.
“He’s only had three big companies in 12 years.
“Berkshire’s top 40 deals in its entire history represent most of our accomplishments.”
“Life is a game where you work very hard and only deal occasionally.”
Mr Munger said Berkshire and Stonehouse had many similarities in their investment and management approach.
“He treats business with a pretty extreme decentralization, which is a lot like Berkshire,” Munger said.
“It’s very difficult to acquire unrelated businesses, get a better return on capital and pay market price for them.
“Most people who try to do this fail.
“And the only reason Berkshire and Stonehouse are successful is that we don’t do it very often, and we’re pretty cautious.”
Mr. Munger and Mr. Jennings got in touch through the University of Chicago’s endowment director who endorsed Stonehouse to the Berkshire vice president.
Throughout 2021 during the pandemic, Mr. Munger and Mr. Jennings got to know each other via Zoom calls before meeting in person for the first time in January this year for a meal on the patio of Mr. Munger in Los Angeles.
Mr Jennings said Mr Munger had been his “investment guru” since he was a teenager living in Virginia and attending Berkshire’s famous annual shareholder meetings since the 1990s in the hometown of Mr Munger and Mr Buffet , Omaha.
“Having Charlie involved in our business has been surreal,” Mr Jennings said in a separate interview with the Financial analysis.
“I’ve looked up to him all my life, and now he’s become a business partner.”
The usually low-key Mr Jennings met his Australian wife in Brisbane 20 years ago while studying.
They then lived in Washington DC and Boston, with Mr. Jennings working in consulting and venture capital, while completing a master’s degree in business administration at Harvard University.
The couple moved in 2010 to Melbourne. Mr. Jennings created the venture capital group of AGL Energy, building and buying new energy assets.
Mr Jennings met the former chairman of AGL, former Macquarie banker Mark Johnson.
With the backing of Mr Johnson, who is now a non-executive director of Stonehouse, Mr Jennings founded the Melbourne-based investment holding company and set out to build an Australian version of Berkshire.
Stonehouse has a relatively modest capital base of $120 million under management for clients such as university foundations including the University of Sydney and the University of Chicago, family offices and high net worth individuals.
Its investment funds are closed to new capital until 2052.
However, Stonehouse and its existing investment partners have additional “dry powder” to deploy on potential larger future deals, Jennings said.
Stonehouse reinvests profits from the investment holding company into its subsidiaries and also allocates returns to new business acquisitions.
Stonehouse ranks as an active acquirer of businesses worth between $20 million and $150 million to be held indefinitely as independent, stand-alone businesses.
Part of his pitch is that there is an alternative divestment option for vendors beyond private equity or a strategic sale.
“We’re just looking for big companies to acquire,” Jennings said.
“We want business owners to know that there is a good, credible, long-term buyer available to them.”
Mr Jennings said some of the investment holding company’s best years were when no deals were done.
“You have to be prepared to be patient and focus on the long term.”
Mr. Munger is a sponsor of Stonehouse.
“Money isn’t all that material for the Mungers,” Mr. Munger said of his personal investment with Stonehouse.
“I did it because I admired him, and he’s a rare guy and I thought that would help him.”
“My experience has been that if I meet good people and get to know them, love them and help them a little bit, maybe one day it will help me or Berkshire.”
Mr. Munger’s stake in Stonehouse is an uncommon personal investment outside of Berkshire.
His other known current personal investments include the Daily Journal Corporation, properties in California since the beginning of his career, Costco where he was a director for 22 years, with Li Liu of Himalaya Capital and with the owner of an American apartment Avi Mayer.
Mr Munger reduced his stake in Jack Ma’s Alibaba in April.
Mr Munger once visited Australia about 20 years ago on a fishing trip to Cape York in Queensland.
“I really enjoyed my time in Australia,” Mr Munger said. “Cape York was where I mainly fished. Good barramundi. I love Australia.
“Americans and Australians are both a group of immigrants from England.”