Berkshire's Charlie Munger backs Costco against Amazon: Costco will be 'huge internet player'

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Berkshire Hathaway vice chairman Charlie Munger claimed retailer Costco could become a "huge internet player," posing a major threat to juggernaut Amazon. 

Munger, 97, spoke during a conference Friday, laying out a vision of the current marketplace that he claims is "even crazier than the dot-com boom." 

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He heaped praise specifically on Costco – a company in which Berkshire Hathaway held $1.3 billion in shares until Buffet sold the position last year. Munger highlighted the company’s buy-in-bulk, membership-only model as a smart way to keep costs low. 

Charlie Munger, vice chairman of Berkshire Hathaway Inc.  (Patrick T. Fallon/Bloomberg / Getty Images)

But he took his praise a step further as he predicted Costco could grow to challenge Amazon, The Weekend Australian reported. 

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"Amazon may have more to fear from Costco in terms of retailing than the reverse," Munger said, adding it would be a "sentence from hell" to compete with the company. "Costco will eventually be a huge internet player. People trust it and they have enormous purchasing power."

COLCHESTER, VERMONT – AUGUST 4: Shoppers search for items at a Costco Wholesale in Colchester, Vermont. The cost of groceries has been rising at the fastest pace in years since the coronavirus pandemic hit the U.S. economy.  (Photo by Robert Nickelsberg/Getty Images / Getty Images)

Costco has seen strong growth this year, with the retailer reporting net sales of around $18 billion for the retail month of November – a nearly 16% increase year-over-year. Total sales rose 9.2%, according to Seeking Alpha. 

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Munger had previously praised Costco on numerous occasions, including in 2011 when he said "If once or twice in a lifetime you’re associated with such a business, you’re a very lucky person." 

Seattle: People visiting the Amazon Go cashierless grocery store late in the day on Capitol Hill. Amazon also owns the Whole Foods grocery chain. (iStock)

Munger earlier this year compared Costco and Amazon as well, claiming people trusted Costco "to be delivering enormous values."

"And that is why Costco presents some danger to Amazon," Munger explained in February. "Because they've got a better reputation for providing value than practically anybody, including Amazon."

But Buffet did not seem to share his partner’s glowing praise of the company, despite admitting in a shareholder meeting in 2000 that Munger urged the company to buy more of Costco, but Buffet "blew it." 

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He sold Berkshire Hathaway’s position – which amounted to around 1% of the business – because he believed the money could contribute to higher return opportunities over the coming decade, according to Financhill. 

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