Charlie Munger’s Daily Journal Portfolio: Top 3 Stock Picks

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In this article, we discuss the top 3 stock picks of Charlie Munger’s Daily Journal. If you want our detailed analysis of Charlie Munger’s history, investment philosophy, and hedge fund performance, go directly to Charlie Munger’s Daily Journal Portfolio: Top Stock Picks

3. Alibaba Group Holding Limited (NYSE:BABA)

Daily Journal’s Stake Value: $71,519,000

Percentage of Daily Journal’s 13F Portfolio: 27.65%

Number of Hedge Fund Holders: 115

Charlie Munger’s acquisition of an Alibaba Group Holding Limited (NYSE:BABA) stake in the first quarter of 2021 amid the Chinese tech crackdown made headlines. After acquiring a position in Alibaba Group Holding Limited (NYSE:BABA) in Q1 2021, Munger increased his holding in the tech giant in Q3 and Q4. According to the 13F filings from the fourth quarter of 2021, Munger added 300,000 Alibaba Group Holding Limited (NYSE:BABA) shares to his previous position, and now holds a total of 602,060 shares, worth $71.5 million. The stock accounts for 27.65% of Daily Journal’s Q4 investment portfolio. 

On January 7, JPMorgan analyst Alex Yao lowered the price target on Alibaba Group Holding Limited (NYSE:BABA) to $180 from $210 and kept an Overweight rating on the shares. The analyst stated that he is “turning more cautious” on China’s online consumption outlook and cut Alibaba Group Holding Limited (NYSE:BABA)’s December quarter customer management revenue growth assumption to negative 2% year-over-year from positive 5%. The analyst thinks the stock will continue to be under pressure in the near future, “despite low valuations.” However, when Munger purchased Alibaba Group Holding Limited (NYSE:BABA) shares in Q4, his endorsement of the stock outweighed any concerns that stemmed from JPMorgan’s assessment. 

Alibaba Group Holding Limited (NYSE:BABA)’s shares fell 4% on January 18, when the Biden administration launched an investigation of the company’s cloud business, citing national security concerns. The US officials are looking into how Alibaba Group Holding Limited (NYSE:BABA)’s cloud server saves the personal information and intellectual property of American users, and whether the Chinese government can access that information. Two possible outcomes of the investigation could occur, including limiting the way American customers’ database is maintained on Alibaba Group Holding Limited (NYSE:BABA) cloud, or prohibiting the use of the tech giant’s services by American clientele altogether.

Fisher Asset Management is the largest Alibaba Group Holding Limited (NYSE:BABA) stakeholder from the 115 hedge funds that were bullish on the stock in the third quarter of 2021. Billionaire Ken Fisher’s fund owns 14.2 million shares of Alibaba Group Holding Limited (NYSE:BABA), worth $2.10 billion. 

Here is what ClearBridge Large Cap Growth Strategy has to say about Alibaba Group Holding Limited (NYSE:BABA) in its Q3 2021 investor letter:

“Large cap companies continue to serve an ever more global marketplace, leading us to research growth opportunities beyond the U.S. We first purchased Alibaba, China’s leading e-commerce and digital payments platform, in 2018 to gain greater exposure to the emerging Chinese consumer market. Recently, Alibaba has borne the brunt of Beijing’s regulatory crackdown on technology companies that began in late 2020 with the postponement of the Ant Financial IPO. While the stock was the primary detractor from performance in the third quarter, with the Chinese government’s antitrust investigation of Alibaba now closed and Ant Financial being revamped, we believe Alibaba is moving past major regulatory risks. The stock now trades at a substantial valuation discount relative to its growth potential. We continue to view Alibaba as a durable business with the potential for sustained revenue and profit growth and the scale to weather periods of disruption due to its size, balance sheet and importance to the Chinese economy.”

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