Munger’s Alibaba Loses Its Sparkle in 2021

Among the five holdings of


Charlie Munger
(Trades, Portfolio)’s Daily Journal Corp. (DJCO, Financial), Alibaba Group Holding Ltd. (BABA, Financial) finished the year in the red while the other four holdings saw gains.

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The vice chairman of Berkshire Hathaway Inc. (

BRK.A, Financial)(BRK.B, Financial) inspired CEO
Warren Buffett
(Trades, Portfolio) to invest in high-quality stocks for the long term. Prior to working at Berkshire, Munger studied mathematics at University of Michigan and law at Harvard. The chairman of Los Angeles-based Daily Journal introduced the concept of “Elementary, Worldly Wisdom” as it relates to business and finance.

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As of the Sept. 30 filing date, Daily Journal’s $225 million equity portfolio contains five holdings: Alibaba, Bank of America Corp. (

BAC, Financial), Wells Fargo & Co. (WFC, Financial), U.S. Bancorp (USB, Financial) and POSCO (PKX, Financial). The three financial services holdings occupy 79.84% of the equity portfolio.

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Alibaba

Daily Journal owns 302,060 shares of Alibaba (

BABA, Financial), allocating 19.86% of its equity portfolio to the stake.

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Shares of Alibaba traded around $119.23, approximately 9.68% above its 52-week low and down over 51% for the year. The stock is significantly undervalued based on Thursday’s price-to-GF Value ratio of 0.31.

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GuruFocus ranks the Chinese e-commerce giant’s profitability 8 out of 10 on several positive investing signs, which include a three-star business predictability rank and profit margins that outperform more than 77% of global competitors.

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Other gurus with holdings in Alibaba include


PRIMECAP Management
(Trades, Portfolio),
Ken Fisher
(Trades, Portfolio) and
Baillie Gifford
(Trades, Portfolio).

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Bank of America

Daily Journal owns 2.3 million shares of Bank of America (

BAC, Financial), dedicating 43.35% of its equity portfolio to the holding.

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Shares of Bank of America traded around $44.73, up approximately 49.82% for the year. The stock is significantly overvalued based on Thursday’s price-to-GF Value ratio of 1.31.

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GuruFocus ranks the Charlotte, North Carolina-based bank’s financial strength 3 out of 10 on the back of cash-to-debt and debt-to-equity ratios that are underperforming more than 70% of global competitors.

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Buffett’s Berkshire also has a holding in Bank of America: The insurance conglomerate owns 1,010,100,606 shares, giving the position 14.61% equity portfolio weight.

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Wells Fargo

Daily Journal owns 1,591,800 shares of Wells Fargo (

WFC, Financial), giving the position 32.80% equity portfolio weight.

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Shares of Wells Fargo traded around $48.34, up approximately 62.52% for the year. The stock is fairly valued based on Thursday’s price-to-GF Value ratio of 1.03.

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GuruFocus ranks the San Francisco-based bank’s financial strength 3 out of 10 on the back of cash-to-debt and debt-to-equity ratios underperforming more than 60% of global competitors.

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U.S. Bancorp

Daily Journal owns 140,000 shares of U.S. Bancorp (

USB, Financial), giving the holding 3.69% of equity portfolio space.

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Shares of U.S. Bancorp traded around $56.26, up approximately 24.28% for the year. The stock is fairly valued based on Thursday’s price-to-GF Value ratio of 0.99.

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GuruFocus ranks the Minneapolis-based bank’s profitability 6 out of 10 on the back of a 4.5-star business predictability rank despite three-year revenue growth rates outperforming just over 57% of global competitors and three-year earnings growth rates underperforming more than 67% of global banks.

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POSCO

Daily Journal owns 9,745 shares of POSCO (

PKX, Financial), giving the position 0.30% weight in the equity portfolio.

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Shares of POSCO traded around $58.07, up approximately 0.2% for the year. The stock is fairly valued based on Thursday’s price-to-GF Value ratio of approximately 1.

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GuruFocus ranks the South Korean steel company’s profitability 6 out of 10 on the back of profit margins outperforming more than 60% of global competitors despite three-year earnings decline rates underperforming over 66% of global steel companies.

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