Charlie Munger’s big Alibaba blunder

Billionaire Charlie Munger said investing in Alibaba was one of the biggest mistakes he has ever made.

Munger is best known for his relationship with Warren Buffett and the popular Berkshire Hathaway annual meeting, where they answer questions from delegates.

For decades, he has served as Berkshire Hathaway’s vice chairman and Buffett’s right-hand man, but it is not Munger’s only business interest.

He was also the former chairman of the Daily Journal Corporation, based in Los Angeles, California, and a director of Costco Wholesale Corporation.

As part of his involvement at the Daily Journal, he oversees the newspaper’s investment portfolio.

Munger has a very small stock portfolio at the Daily Journal – Bank of America, Wells Fargo, Alibaba, and Bancorp.

Munger famously said that diversification is for the “know-nothing investors”, not for professionals.

However, with such a small portfolio, one mistake can significantly impact your investments’ performance.

A good example is Alibaba. Daily Journal first disclosed its stake in Alibaba in 2021, after which the stock price plummeted.

Munger executed the Alibaba investment, and he has now called it one of the biggest mistakes he has ever made.

Speaking at the Daily Journal annual shareholder meeting, Munger said he got charmed by Alibaba’s position in the Chinese Internet market.

“I didn’t stop to realize that they’re still a damned retailer,” Munger told shareholders.

He also slated Alibaba founder Jack Ma’s criticism of Chinese banks and regulators in late 2020.

Ma accused the state-run banks of having a “pawnshop mentality”, and it was not long before Alibaba and Ant were targeted by Chinese authorities through regulatory obstacles.

The Alibaba share price plummeted from around $300 in October 2020 to just over $60 two years later, causing tremendous wealth destruction for shareholders.

Munger said Ma’s speech was “pretty stupid”, equating it to poking a bear in the nose with a sharp stick.

“Jack Ma got way out of line by popping off the way he did to the Chinese government. Of course, it hurt Alibaba,” Munger said.

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