American billionaire Charlie Munger picked five stocks for the Daily Journal investment portfolio he manages – Bank of America, Wells Fargo, Alibaba, US Bancorp, and Posco ADR.
Charlie Munger is one of the world’s best-known investors thanks to his relationship with Warren Buffett and the popular Berkshire Hathaway annual meeting where they answer questions.
Munger, who serves as vice chairman of Berkshire Hathaway, started his career as a real estate attorney. He later left to concentrate on managing investments.
Munger met Buffett through mutual friends in Omaha, and he gradually took over the role of Buffett’s business partner and investment advisor from Benjamin Graham.
Their friendship and the business relationship grew, and he became Buffett’s right-hand man and vice chairman of Berkshire Hathaway.
Munger has many business interests outside of Berkshire Hathaway, which included serving as the chairman of the Daily Journal newspaper for 45 years.
As part of his involvement at the newspaper, he oversees the Daily Journal’s investment portfolio.
This article explores Munger’s investment decisions as manager of the Daily Journal’s $174.9 million portfolio.
In contrast with investors like Ray Dalio, who have very diverse portfolios, Munger owns very few stocks.
Munger famously said that diversification is for the “know-nothing investors”, not for professionals.
“The idea that very smart people with investment skills should have hugely diversified portfolios is madness,” Munger said.
“It’s a very conventional madness, and it’s taught in all the business schools. But they’re wrong.”
Munger practices what he preaches – two banking stocks make up more than half of the Daily Journal portfolio.
Bank of America makes up 40.9% of the portfolio, while Wells Fargo makes up 35.6% of the portfolio.
These two holdings have remained unchanged since 2013, and he has not bought or sold additional shares in these companies since then.
His most notable move is with Alibaba, which currently makes up 19.5% of the portfolio.
He started stocking up on Alibaba shares at the start of 2021, and quadrupled his holding to 600,000 shares by the end of the year.
At the start of 2022, he reversed course and halved his position to 300,000 shares. It is estimated that Daily Journal made a 40% loss on the sale of these shares.
Many investors consider Alibaba a mistake on the part of Charlie Munger and think he is cutting his losses.
However, there is speculation that the sale of Alibaba shares was made to buy it back on the Hong Kong stock exchange, a position that Daily Journal would not be obligated to disclose.
It is possible since the company recently reported seven holdings – five US stocks declared and two undisclosed holdings.
It is believed that the two undisclosed holdings are Alibaba and BYD, a Chinese electric-vehicle company that Munger and Buffett like.
Berkshire Hathaway bought 225 million shares in the company in 2008 for $232 million, which is now worth over $8 billion.
The table below shows the five disclosed stocks on the Daily Journal investment portfolio that Munger manages.
|Daily Journal investment portfolio|
|Bank of America||$71.6 million||40.9%|
|Wells Fargo||$62.4 million||35.6%|
|US Bancorp||$6.4 million||3.7%|