Daily Journal Corp., a newspaper business that Charlie Munger manages a portfolio for, cut nearly half of its stake in Chinese Internet company Alibaba Group.
Munger cut its ownership from 602,060 to 300,000 shares at the end of March, according to a recent regulatory filing. The fund previously increased its stake in the firm by 300,000 shares during the fourth quarter of 2021 compared to third-quarter filings.
According to Bloomberg, “Daily Journal is known for its collection of papers and for selling software to customers that include justice agencies and courts. The business also holds a collection of stocks in addition to its operating businesses, similar to Berkshire’s strategy of also investing while owning businesses. Its stock portfolio consisted of five different publicly disclosed investments at the end of March, which includes the Alibaba holding that it first started disclosing a year ago.”
Ali Baba had announced an impressive share buyback plan earlier this year, “The upsized share buyback underscores our confidence in Alibaba’s long-term, sustainable growth potential and value creation. Alibaba’s stock price does not fairly reflect the company’s value given our robust financial health and expansion plans,” said the company’s deputy chief financial officer, Toby Xu.”
Long Leaf Partners Fund on BABA
“Alibaba Group Holding Limited (NYSE:BABA) (-50%, -2.26%; -22%, -0.82%), the largest online retail platform in China, was another top detractor for the year and in the fourth quarter. Alibaba Group Holding Limited (NYSE:BABA) reported weak quarterly results and downgraded its sales outlook for the current fiscal year to 20- 23% growth, down from original guidance of 29-32% growth. Macro headwinds, weak consumer sentiment, regulatory scrutiny and competitive forces are having a larger than expected impact on overall retail sales and Alibaba’s market share. Notably, overall retail sales in China slowed down to a meager 5% growth in the September quarter. Slowing consumption, combined with stiff competition from new entrants in livestreaming ecommerce, have resulted in transitory deceleration in Alibaba’s core ecommerce growth trajectory. Additionally, Alibaba Group Holding Limited (NYSE:BABA) is accelerating strategic investments in new initiatives, including Community Group Buying (Taocaicai), Taobao Deals, Local Consumer Services and International Ecommerce. These are future growth drivers but are depressing company’s earnings today. In December, we exited our full position in Alibaba. This was more of a tactical move than a change in investment conviction. We initiated the position early in 2021, and the continued challenges in the second half of the year resulted in a loss that was material enough to be helpful from a tax distribution management point of view. We are sensitive to taxable gains and try to minimize where sensible, so we took advantage of the opportunity to reduce that liability and plan on revisiting the Alibaba Group Holding Limited (NYSE:BABA) opportunity in 2022. We continue to own Alibaba in our Asia Pacific strategy.”