Buffett’s friend at Daily Journal halves Alibaba’s stake as stock slump hits US$212 million portfolio

Daily Journal reported sale in first-quarter 13F filing on Monday, after doubling down on bets last year amid a slump

Sale underscores difficulty in determining a floor for Chinese tech stocks as regulatory crackdown, Covid-19 lockdowns hit earnings

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Charlie Munger walks past a crowd at the annual Berkshire shareholder shopping day in Nebraska in May 2019. Photo: Reuters

Published: 10:36am, 12 Apr 2022Updated: 3:55pm, 12 Apr 2022

Daily Journal Corp, a publishing and software business overseen by Warren Buffett’s business partner Charlie Munger, halved its stake in Chinese e-commerce group Alibaba Group Holding last quarter as the value plunged.

The firm reported a holding of 300,000 depositary shares worth US$32.6 million in its first-quarter 13F report, according to a US regulatory filing on Monday. It had 602,060 shares on December 31, then valued at US$71.5 million.

Munger is Daily Journal’s chairman and oversees its investment portfolio, in addition to his role as a vice-chairman at Berkshire Hathaway. The publisher first unveiled a position in Alibaba in the first quarter of 2021, with a stake of 165,320 shares worth US$37.5 million or US$227.63 each on average. It last traded at US$101.11 in after-hours trading.

The sale underscores the difficulty in determining the floor for Chinese tech stocks more than a year after Beijing’s unprecedented regulatory crackdown on internet-platform operators. Money managers continue to be wrong-footed by challenges to earnings amid China’s uncompromising zero-Covid strategy and citywide lockdowns.

“That reflects the weak understanding among foreign investors of how the regulatory crackdown has ultimately affected Big Tech’s business models,” said Dai Ming, a money manager at Huichen Asset Management in Shanghai. “While they have started new business to sidestep tougher regulatory oversight, these new businesses will need more time to break even or make a profit.”

Manuel Muhl at Frankfurt-based DZ Bank, the first analyst to call a sell on Alibaba in July 2021, has said declines in Chinese tech stocks are a trap for investors seeking to fish the market bottom, given that some of the risks are unquantifiable. Alibaba is the owner of this newspaper.

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