Help! Charlie Munger has sold 50% of his holdings in Alibaba . Do we need to follow him?

Help! Charlie Munger has sold 50% of his holdings in $BABA. Do we need to follow him?  If we ask the above question, it is likely that we have not done a deep dive into the business.

Charlie Munger sold 50% of his BABA shares.

People buy for 1 reason (to profit from the investment) but they can sell for a thousand reasons.  What could have led Mr Munger to sell may not be the same consideration for us.  If the stock is so bad, why should he still keep 300,000 shares?  If it is to "stop loss", wouldn't it be better for us to sell all?  This is important as we need to qualify our investment decisions through our own research.  We cannot invest based on borrowed conviction.

Peter Lynch said this

"If we are not able to explain the business to young children in 5 minutes, we do not know the business enough."

The main consideration for our investments should be the fundamentals, moat and opportunity costs.  As one of the best value investors, I doubt that the near terms considerations or volatility would affect Mr Munger.  In $DJCO, he did not make any purchase for 6 years before adding BABA to his current portfolio.  He is not known to be impatient, rash or impulsive - temperaments and discipline that are essential for value investing.  In fact, he is one who is famed to hold stocks for a long time.   At Berkshire, Mr Buffett and Mr Munger sat on a cash pile of over $146 billion.  As per their recent letter to shareholders, they mentioned that they could not find "opportunities" worth the investment that fit Berkshire.

Charlie Munger's Q1/2022 13F

For the fact that there are 50% or 300,000 shares remaining - it is not an exit. Probably it is more like closing the margin account, a better opportunity or tax-loss harvesting. Of course, I can be wrong as I am no Charlie Munger.  But I have done my own homework on this stock.

Some Notable highlights from BABA Q4/2021 earnings:

• Global annual active consumers reached 1.28 billion as of 31 Dec 2021 with quarterly growth of 43 million. This implied a 27% year over year increase for local customers and 18% for international customers.
• This is made up of 979 million consumers in China and 301 million consumers international (outside of China).
• Alibaba aims to reach carbon neutrality by 2030 and has committed to an additional 1.5 gigatons of decarbonization by 2035, partnering with consumers, customers and partners in their ecosystem
• Revenue Growth of 10% year on year for last quarter of 2021.
• Income from operations came to USD$1.109 billion which included a USD$3.945 billion impairment of goodwill (which may be treated as an exception, not part of the norm).  The drop in profits is also caused by increased investment in growth initiatives, merchant support and increased spending for user growth.
• Share re-purchased of USD$1.4 billion in the last quarter (about 10.1 million ADS)

Income statement of BABA from 2012 to 2021

• Note that BABA's net income grew from $670M (2012) to $23,127M (2021) and their EPS (Basic) grew from $0.30 (2012) to $8.54 (2021)

Reuters news reported the following on 22 Mar 2022: 

March 22 (Reuters) - Alibaba raised its share buyback programme to $25 billion on Tuesday, the largest ever repurchase plan by the e-commerce giant, to prop up its battered shares as it fights off regulatory scrutiny and concerns about slowing growth.

This is not just a push for BABA but more so for due diligence.  Let us research before investing.  Hopefully, our personal conviction (from research) will guide us well in our investing journey.