In this article, we discuss Charlie Munger’s stock portfolio and his 5 biggest stock positions. You can skip our introductory talk on Charlie Munger and read Charlie Munger Stock Portfolio: 2 Biggest Positions.
Charlie Munger, the 98-year-old billionaire investor and a partner of Warren Buffett, bought the Daily Journal in late 1970s through the New America Fund. Because of his background, Munger transformed the Daily Journal into a law publication. Munger graduated magna cum laude with a J.D. from Harvard Law School in 1948. At Harvard, he was a member of the Harvard Legal Aid Bureau. The company now sells software to court systems and justice agencies, and publishes newspapers.
Earlier this year, Munger gave up the chairman title at the Daily Journal Corp. and donated $1 million of stock to create an equity-incentive plan for the company.
Charlie Munger has invited the wrath of retail investors on platforms like Reddit because of his harsh comments against cryptocurrencies. Earlier this year, Munger reportedly said during an annual meeting of the Daily Journal that cryptocurrencies should be banned.
“I certainly didn’t invest in crypto. I’m proud of the fact I’ve avoided it. It’s like a venereal disease or something. I just regard it as beneath contempt.”
Munger also praised China for dealing with crypto with an iron hand.
Munger also once called Bitcoin “rat poison.”
“Certainly the great short squeeze in GameStop was wretched excess, certainly the Bitcoin thing is wretched excess. I would argue that venture capital is throwing too much money too fast, and there’s a considerable wretched excess in venture capital and other forms of private equity,” said Munger during the annual meeting.”
Munger’s publication made a lot of money during the housing crisis of 2008 as it used to publish foreclosure notices related to the housing markets of California and Arizona. However, after the economy recovered, Munger’s publication started investing in stocks. The SEC was quick to object that the publication did not qualify to invest in stocks as it was not an investment company. However, as reported by the FT, the Daily Journal’s counsel responded:
“The board recognized that this decision would be contrary to the conventional (but questionable) notion that the least risky way to preserve corporate capital for the long-term benefit of stockholders is to invest it in government bonds at interest rates approximating zero, notwithstanding rising inflation.”
Overall, the Daily Journal’s strategy of investing in stocks has been successful. According to FT, the fund reported at the end of June that it had $187 million of unrealized gains on a $342 million portfolio. The company has also enjoyed millions of dollars in dividends. This became an excellent hedge against the risks and downturns in the publication industry, which has crushed many publications as they scramble to earn the elusive advertising revenue.
However, some believe the Daily Journal’s strategy of amassing Alibaba Group Holding Limited (NYSE:BABA) shares throughout 2021 was extremely bad, as the fund has suffered huge losses from that investment this year. The fund was buying huge stakes in the Chinese company when Chinese regulators were getting ready to punish the ecommerce company. Several hedge funds started exiting Alibaba Group Holding Limited (NYSE:BABA) in 2021. But Munger was late. Reports also suggest that Alibaba was Munger’s personal choice and it was his decision to pile into the Chinese company.
Unlike his friend and partner Warren Buffett, who has a fairly diversified portfolio, Munger’s investment portfolio has just five stocks as of the end of the second quarter.
The Daily Journal, being a public company, has suffered in 2022 as its stock tanked over 20% year to date as of October 31.
Charlie Munger
Our Methodology
For this article we picked the top holdings of Charlie Munger based on his fund the Daily Journal’s second quarter portfolio.
Charlie Munger Stock Portfolio: 5 Biggest Positions
5. POSCO Holdings Inc. (NYSE:PKX)
Charlie Munger’s hedge fund made no change in its holding in the South Korean Steel company Posco. The fund owned 9,745 shares of the company which had a value of $357,000 at the end of June. The company recently said that it expects it Q3 operating profit to decline by more than 70% on a year-over-year basis, mainly because of Typhoon Hinnamnor, which affected the company’s steel mills. On a year-to-date basis the stock has lost 24%.
Among the notable hedge funds having sizable stakes in the company include Richard S. Pzena’s Pzena Investment Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Paul Marshall and Ian Wace’s Marshall Wace LLP. A total of 8 hedge funds tracked by Insider Monkey had stakes in the company at the end of the second quarter.
4. U.S. Bancorp (NYSE:USB)
Like his friend and partner Warren Buffett, Charlie Munger is also a fan of U.S. Bancorp (NYSE:USB). At the end of the June quarter, Munger’s hedge fund owned 140,000 shares of the company. The total worth of these shares was $5.7 million. U.S. Bancorp (NYSE:USB) recently received all required approvals for the acquisition of MUFG Union Bank’s core regional banking franchise from Mitsubishi UFJ Financial Group (OTCPK:MBFJF) (MUFG). The deal, which is expected to close by December 1, will bring one million customers for U.S. Bancorp (NYSE:USB) and around 190,000 small business customers on the West Coast. In its third quarter results, the bank beat the Street’s revenue estimates by $130 million. Average loans in the period jumped 13.5% as compared to the same quarter last year. U.S. Bancorp (NYSE:USB)’s results were helped by a sharp rise in net interest income, loan and deposit growth as well as higher interest rates.
U.S. Bancorp (NYSE:USB) presents an attractive buying opportunity as it has lost 30% year to date. Its PE ratio is now under 10. It has a strong dividend yield of over 4% and the company has increased its payout consistently for the last 10 years.
At the end of the June quarter, 43 hedge funds tracked by Insider Monkey had stakes in the company, compared to 40 in the period earlier.
Here is what ClearBridge Investments Dividend Strategy has to say about U.S. Bancorp (NYSE:USB) in its Q4 2021 investor letter:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We have increased our exposure to interest-rate sensitive banks by adding to existing positions in U.S. Bancorp.”
3. Alibaba Group Holding Limited (NYSE:BABA)
Alibaba Group Holding Limited (NYSE:BABA) has been featuring in Charlie Munger’s portfolio for several quarters. Charlie Munger’s fund reported owning 300,000 Alibaba Group Holding Limited (NYSE:BABA) shares as of the end of the second quarter. The total worth of these shares was $24 million. Earlier this year, Munger cut his stake in Alibaba in half. As of the end of the first quarter, Munger’s hedge fund had owned just 300,000 American depositary shares in Alibaba Group Holding Limited (NYSE:BABA), down from a whopping 602,060 shares at the end of last year.
In late September, Citi said in a note to investors that while Alibaba Group Holding Limited (NYSE:BABA) has improved its operational efficiency, rising Covid cases and lockdown could hurt the company. Citi’s analyst Alicia Yap cut her revenue estimates for Alibaba Group Holding Limited (NYSE:BABA) by 0.6% for fiscal 2023 but raised non-GAAP profit estimates by 15.2%. The analyst has a Buy rating on the stock.
Hedge fund sentiment for Alibaba Group Holding Limited (NYSE:BABA) is showing signs of strength. As of the end of the second quarter, of the 895 funds tracked by Insider Monkey, 106 had stakes in the company, compared to 100 funds in the previous quarter. Ken Fisher has a $1.65 billion stake in Alibaba Group Holding Limited (NYSE:BABA) .
Here is what Mawer Investment Management has to say about Alibaba Group Holding Limited (NYSE:BABA) in its Q3 2022 investor letter:
“Other companies that have seen declines include those that have been impacted by macroeconomic uncertainty in China. Both Alibaba (NYSE:BABA) and Tencent (OTCPK:TCEHY) have reported results that are negative fundamentally, and while both have been under pressure from new competition, the recent results are also a reflection of the economic state in China.”
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Disclosure: None. Charlie Munger Stock Portfolio: 5 Biggest Positions is originally published on Insider Monkey.