Munger is a well-known China bull. It became even more evident when he bought a substantial position (19% of the portfolio) in Alibaba via Daily Journal Corp in the first quarter of 2021.
He doubled the position in Alibaba $Alibaba(BABA)$$Alibaba(09988)$at the start of 2022. Many investors look upon Munger as an influential investor and take heed in the things he say and do. Despite the tumbling share price, Alibaba investors found comfort in the wise man's 'endorsement'.
But it all changed when Daily Journal's position in Alibaba was reportedly halved. It is optically damaging because it raises questions (did Munger think that it was a mistake) and dents confidence at the same time. It is likely that some investors will dump Alibaba shares just because of this.
The thing is, Munger has never explained why he buys or sells certain securities. It is all for investors to make their own interpretations. There could be reasons that we may not really know.
Munger stepped down as the chairman of Daily Journal just two weeks ago and it is quite certain that he was the one who made the selling decision because he remains as a director and is still in charge of the securities portfolio.
Investors can see this incident as 'the glass is half empty or half full'. The 'half empty' reasoning is the obvious one and that Alibaba is bad because Munger is selling.
The 'half full' version is that he is halving the stake, not selling an entire stake. The position is still quite large. Would he sell the remaining half? Possible and only time will tell.
Daily Corp's investment in Alibaba is just one of the many Chinese stocks Munger owns indirectly. He has been investing in China for more than 15 years via Himalaya Capital which is managed by Li Lu. There are no reports about the stake he has in China equities though because it is private wealth.
I would suggest a third way of looking at it - don't look too much into it. Investing is personal because competencies, beliefs and circumstances are different.
It is highly likely that our portfolios are different from Munger or even Buffett, even if we look upon them as great investors. In fact it is very rare for any two portfolios to be the same.
For example, Buffett bought into HP Inc which left a lot of investors bewildered with that choice and unlikely investors will just follow to buy the stock.
Basically it is the confirmation bias acting up. It begins with our preferred stock and then we look around for validation of our choice.
For example investors may like Apple or Snowflake and then Berkshire had stakes in them - wow these are good stocks as confirmed by Buffett. But most didn't like HPQ in the first place, so no one really cares if Buffett bought or sold it (or Alleghany or Occidental or the airline stocks he dumped during Covid).
Alibaba is popular among many investors and some have relied upon Munger's investment in it as a validation. The problem with investing this way is that investors will forever be swayed by the acts of others, never their own.
The successful investors I know develop their own confidence and not by borrowing confidence from the others.
Comments
Now we never know what he actually thinks about Alibaba... Not that we need to know though. It is our money and only we are responsible for ourselves