Charlie Munger's Daily Journal may have bought Alibaba stock because 'the Chinese Warren Buffett' recommended it
- Charlie Munger's Daily Journal took a stake in Alibaba last quarter.
- Li Lu, "the Chinese Warren Buffett," may have recommended the stock.
- Li introduced Munger to BYD and has previously invested in Alibaba.
- See more stories on Insider's business page.
Charlie Munger's Daily Journal invested in Alibaba last quarter. A fund manager dubbed "the Chinese Warren Buffett" may have prompted the surprising move.
Munger, best known as Warren Buffett's right-hand man and Berkshire Hathaway's vice-chairman, has also served as Daily Journal's chairman since 1977. The newspaper publisher added 165,000 American depositary shares (ADS) in Alibaba to its stock portfolio in the first quarter. Its stake was worth $37 million on March 31, making the Chinese e-commerce group its third-biggest holding after Bank of America and Wells Fargo.
Li Lu, the founder and chairman of Himalaya Capital Management, potentially recommended Alibaba to Munger. The pair are close friends, and Li introduced Munger to BYD, the Chinese electric-car company that has been one of Berkshire's best investments in recent years.
Li, who pursued an investing career after listening to Buffett lecture at Columbia University in 1993, has bet on Alibaba before. Himalaya owned 175,000 Alibaba ADSs worth $34 million in the first quarter of 2020, and held 53,000 of them for most of 2018, SEC filings show.
Munger clearly values Li's opinion. He complimented the Himalaya chief's intelligence, energy, patience, strategic aggression, and ability to weather losses at the Daily Journal shareholder meeting in 2018. Moreover, he's entrusted Li with a chunk of his fortune.
"I've given Munger money to some outsider to run once in 95 years," Munger said at the Daily Journal meeting in 2019. "That's Li Lu, and of course he's hit it out of the park."
Munger also described Li as "the Chinese Warren Buffett" during that meeting, and lauded him for focusing on Chinese stocks instead of the oversaturated American market.
"Li Lu just went where the fishing was good and the rest of us are like cod fishermen who are trying to catch cod where the fish have been fished out," he said.
Munger went as far as telling The Wall Street Journal in 2010 that it was a a "foregone conclusion" that Li would become one of Berkshire's investment bosses in the future.
Yet Munger's Alibaba bet is surprising even if Li suggested the stock to him. Munger expressed skepticism towards ADSs at the Daily Journal meeting in 2019, saying that he knew little about them and was suspicious of manufactured investment products that are aggressively promoted.
Moreover, Munger criticized Alibaba's cofounder during the latest Daily Journal meeting in February - despite investing in the online retailer that same quarter.
"Jack Ma was very arrogant to be telling the Chinese government how dumb they were and how stupid their policies were and so forth," he said. "Considering their system, that is not what he should have been doing."
Munger offered an explanation for the Alibaba wager in a statement to Barron's. Daily Journal wanted to hold cash equivalents and Treasury bills were yielding too little, he said, so the company had turned to common stocks. Munger also expressed optimism about Alibaba's long-term prospects.
Notably, Li may also be getting stock tips from Munger. Himalaya added a new $100 million stake in Apple, Berkshire's biggest position by far, in the fourth quarter of 2020. It also reported Bank of America, Daily Journal's largest position and Bank of America's second-largest, as its number-two holding.