Charlie Munger (Trades, Portfolio), chairman of Daily Journal Corp. (DJCO, Financial), disclosed this week that the company purchased a new stake in Alibaba Group Holding Ltd. (BABA, Financial) during the first quarter according to a quarterly portfolio filing.
The vice chairman of Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) inspired the "Oracle of Omaha" to invest in high-quality businesses for the long term. The Buffett-Munger investing strategy considers four key criteria of good companies: understandable business, favorable growth prospects, honest and competent management and available at attractive prices.
As of the March quarter, Daily Journal's $125 million equity portfolio contains five stocks with a turnover ratio of 19.02%. The top sectors in terms of weight are financial services, consumer cyclical and basic materials, representing 80.63%, 19.02% and 0.36% of the equity portfolio.
Transaction details
Daily Journal purchased 165,320 shares of Alibaba (BABA, Financial), giving the position 19.02% equity portfolio weight. Shares averaged approximately $245.98 during the first quarter; the stock is significantly undervalued based on Tuesday's price-to-GF Value ratio of 0.66.
Company background and financial position
Hangzhou, Zhejiang-based Alibaba operates several online marketplaces, including the consumer-to-consumer platform Taobao and business-to-consumer platform Tmall. GuruFocus ranks the e-commerce giant's financial strength 7 out of 10 on several positive investing signs, which include a strong Altman Z-score of 5.65 and debt ratios that outperform over 80% of global competitors.
GuruFocus ranks Alibaba's profitability 9 out of 10 on the back of profit margins and returns outperforming over 90% of global competitors.
Other gurus riding Alibaba's strong profitability include Baillie Gifford (Trades, Portfolio) & Co., Ken Fisher (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).
Disclosure: The author has no positions in the stocks mentioned but may initiate a position in Alibaba over the next week. The mention of guru holdings are as of the specified portfolio filing date and may not reflect any trades or portfolio hedges made beyond the filing date.
Stocks mentioned in the article do not constitute a recommendation. Investors must do their own diligent research before investing in the stocks mentioned.
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