The last time the Daily Journal Corporation (DJCO, Financial) made a significant change to its stock portfolio was the fourth quarter of 2014.
According to its 13F filing for the last three months of 2014, the firm's portfolio manager, Charlie Munger (Trades, Portfolio), reduced the holding company's position in South Korean steel producer Posco (PKK) by 85% to just under 10,000 shares.
Since then, the company has not made any further changes to its portfolio until recently. In the first quarter of 2021, the Daily Journal added a new holding for the first time in over a decade.
The Journal's new holding
The company that the Daily Journal acquired shares of was Alibaba Group (BABA, Financial). At the end of March, the holding company reportedly owned 165,320 shares in the Chinese tech company, giving it a 19% portfolio weight. The position was worth around $37.5 million.
This is now the third-largest position in the portfolio after Bank of America (BOA, Financial) and Wells Fargo (WFC, Financial). Both of these holdings were acquired during the financial crisis, when Munger was able to snap up shares in the lenders at bargain-basement valuations.
This is only speculation, but it looks to me as if Munger was buying Alibaba stock in the first few days of 2021 when shares in the company fell to a low not seen since the middle of last year. He might have thought this opportunity was too good to pass up.
Why does Munger like Alibaba?
So why might Munger be interested in Alibaba? We don't know the exact answer to this question as of yet. However, we can speculate on the reasons why this billionaire investor might want to own the company when he owns so few stocks.
We know that Munger and Li Lu (Trades, Portfolio) are close friends. Li is one of the most successful value investors to rise to fame in China in recent years. He manages the $30 billion Himalaya Capital, which primarily focuses on long-term investment opportunities in Asia.
We don't know much about the stocks Li likes, as funds are not required to report non-U.S. stock holdings to the SEC. We only know about Himalaya's U.S.-listed equity holdings, which are reported on the firm's quarterly 13F report.
Investing in China's growth
One of Munger's favorite investments is Costco (COST, Financial). He serves on the board of the company, and as such, he knows a little about the retail industry and the advantages companies like Costco and Alibaba have over their competitors.
Further, over the years, Munger has repeatedly praised China for its transition in the past few decades. He has also praised the Chinese way of thinking that drives for continuous improvement.
Therefore, I don't think it's too unrealistic to say that the billionaire was likely attracted to this company because it could be one of the best ways to invest in the Chinese tech sector for the long term.
Whenever Munger buys a stock, he buys with the view of holding forever. He wants to buy established market leaders with wide moats and a long runway for growth. Alibaba seems to have all of those qualities.Again, we can only speculate for now why Munger decided to buy the Chinese technology group, but I think it's likely we'll hear more from him about the position in the future.
One big question is why Munger has decided to buy now. He has been optimistic about China's prospects for a long time, and the stock was cheaper a couple of years ago. Something might have happened that has changed the value investor's perception of the business and its operating environment.
Disclosure: The author owns no share mentioned.
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