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 “Damn Right!”
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Put simply, Munger wasn’t looking for a home run or the next big thing. Instead, he focused on buying simple businesses for less than they’re worth and holding for the long term.
It’s a simple strategy. Instead of being clever, try to be patient. “The big money is not in the buying and the selling but in the waiting,” he once explained.
With that in mind, here are three stocks that the Munger-style waiting game could work with.
D.R. Horton
Homebuilders recently got a vote of confidence from Buffett himself. The Oracle of Omaha added a few homebuilders 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 units. This gap is expected to grow as Americans form more households than homes being built. Plugging this gap could take decades, which is plenty of runway for builders like D.R. Horton.
Meanwhile, the stock is undervalued—trading at just 9.4 times earnings per share. This cheap, Buffett-backed stock should be on your radar for a long-term investment.
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.
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. Following the recent drama with CEO Sam Altman, the tech giant has also 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 should consider adding this stock to their “forever” watch list.
