Daily Journal Chairman Charlie Munger says a new investment in Chinese internet giant Alibaba is part of a move into stocks because returns on Treasury bills are so low.
Houston Cofield/Bloomberg
Warren Buffett’s longtime partner Charlie Munger recently disclosed a new investment in the Chinese internet giant Alibaba Group Holding.
Daily Journal (ticker: DJCO)—Munger has served as chairman since 1977, and provides the firm with investing expertise—disclosed last week in a Securities and Exchange Commission filing that it owned 165,320 Alibaba (BABA) American depositary receipts as of March 31. Daily Journal hadn’t owned any at the end of 2020.
In response to a request for comment on the investment, Munger, who is also the vice chairman of Berkshire Hathaway (BRKb), provided a statement to Barron’s:
“Daily Journal Corporation has and needs securities held as cash equivalents. These cash equivalents would normally be U.S. Treasury Bills. But, with returns on Treasury Bills now so low, the Company instead, invests in common stock. And, unless its long term prospects seem good, a common stock is not considered to be a good cash equivalent.
“A minor part of Daily Journal Corporation’s cash equivalents now consists of a tiny amount of Alibaba common stock.”
That “tiny amount” was valued at $37.5 million as of March 31. Daily Journal could have bought the Alibaba ADRs at any point in the first quarter. So far this year, the ADRs are down 4%, while the S&P 500 index is up about 9.9%.
Alibaba ADRs underperformed the market last year, only gaining 9.7% while the index rose 16.3%. The ADRs tumbled in December when an affiliate was forced by Chinese regulators to scuttle an initial public offering. Barron’s has written about a variety of risks of investing in China.
Daily Journal owns other stocks, as well, and its U.S.-traded investments totaled about $200 million as of March 31. Positions in other investments were unchanged, and the largest investments by dollar value remained Bank of America (BAC) stock at 2.3 million shares, and Wells Fargo (WFC) at 1.6 million shares; Daily Journal’s positions in those two bank stocks are unchanged since at least the end of 2013. The company was required to begin disclosing investment positions at that point because its U.S.-traded portfolio topped the threshold of $100 million.
Interestingly, Warren Buffett has recently overseen trades in both banks through Berkshire Hathaway’s portfolio. Berkshire Hathaway is Bank of America’s largest investor, with more than 1 billion shares after Buffett went on a buying spree last year. Berkshire Hathaway has also been slashing its investment in Wells Fargo. We estimated that cutting the Wells Fargo position, and that of other bank stocks, cost Berkshire Hathaway about $10 billion as the sector later rallied.
Also, Berkshire Hathaway doesn’t own any Alibaba ADRs.
Inside Scoop is a regular Barron’s feature covering stock transactions by corporate executives and board members—so-called insiders—as well as large shareholders, politicians, and other prominent figures. Due to their insider status, these investors are required to disclose stock trades with the Securities and Exchange Commission or other regulatory groups.
Write to Ed Lin at [email protected] and follow @BarronsEdLin.
