Charlie Munger Sold 50% Alibaba In Daily Journal In Q1 2022!

Charlie Munger has sold half of Daily Journal's stake in Alibaba as of Q1 2022, which is a surprising change after Munger doubled down on BABA in Q4 2021 only to reverse course now. Add me on Instagram: michellemarki

Most likely Daily Journal (DJCO) broke even on selling 302,060 shares of BABA in the first quarter of 2022, and now DJCO has 300,000 shares of BABA remaining as its third portfolio position.

Why did Charlie Munger sell Alibaba? I discuss potential reasons as it is currently unknown as to why this GOAT investor decided to reverse course on BABA. Will Charlie sell more BABA in Q2 2022 or will he buy back in at even lower prices?

In spite of defending Alibaba at the Daily Journal annual meeting in mid-February 2022, some change has been afoot and there could be many reasons or one simple reason why Charlie sold 50% of DJCO's stake in BABA.

Exactly a year ago on April 11, 2022, Barrons reported that Charlie normally would have Daily Journal's cash in securities that make for decent cash equivalents, like US Treasury Bills. Back then, the 10 year US treasury bond was yielding around 1%, so Charlie preferred to invest DJCO's cash into BABA rather than T-Bills. Now that the 10 year US treasury bond is yielding around 2%, maybe it's a better place to be than the languishing Alibaba stock right now.

Also a year ago, Charlie said that "unless its long term prospects seem good, a common stock is not considered to be a good cash equivalent" and now maybe Charlie has had a change of heart on Alibaba.

It's still really shocking that Charlie has reversed course on BABA, now acting in a similar manner to Mohnish Pabrai who initially reduced his position before selling out completely. Will Charlie follow in the footsteps of his apprentice, Mohnish?

Or given that Charlie Munger is stepping down from the Chairman role at Daily Journal as of March 2022, is there someone else who decided to liquidate half of the BABA position?

I wonder because DJCO said on March 28 that Charlie will continue being a director, and "will continue to pay particular attention to matters with which he has been involved in the past, including the company’s securities portfolio." But is he only "paying attention" to the portfolio and no longer directing what gets invested or divested in?

A nice touch is that Charlie decided to donate "$1 million worth of his personal Daily Journal stock for the company to use as the basis for a new equity incentive plan," which was out of a total DJCO stake of almost $16 million. He had owned 50,000 shares of DJCO as of the recent FY2021 proxy materials.

There's both good news and bad news for BABA. Barrons reported recently that there's been a "proposed rule change by Chinese regulators that could allow non-Chinese government agencies to access audit documents," which would be good news for Chinese stocks listed in American exchanges.

As long as Chinese companies provide the requisite access to audit documents by 2024, then they'll be in compliance with the US's Holding Foreign Companies Accountable Act. Otherwise Chinese ADR stocks could be delisted, but there has never been a massive delisting of foreign stocks. This will likely become more of a hot topic closer to 2024 unless a compromise is reached sooner.

The bad news is China is undergoing massive lockdowns and that China is accelerating its nuclear building over rising fears of potential conflict with the US.

But in happier news, Warren Buffett has been on a shopping spree with Berkshire Hathaway in 2022. He's bought Occidental Petroleum, Allegheny Insurance, and Hewlett Packard (HP). So lets see what both Warren Buffett and Charlie Munger might invest in throughout 2022!

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