Charlie Munger stopped selling BABA in Q2/2022 (22Jul22)
Daily Journal Corp (DJCO) has released its Q2/2022 13F update recently. There are some observations that I have made, especially regarding the recent purchases and sales of Alibaba shares by Mr Charlie Munger.
Charlie Munger is one of my biggest influences coming to value investing. I am a great fan of the wit, humour and temperament that he displayed pertaining to investing - especially the patience.
In Q2/2022, there are no activities - no buy or sell in the last quarter.
From the table listing recent activities, we can see that Mr Munger is happy to sit on cash for years (No purchase or sales between Q1 2015 and Q42020). This is a good 6 years of no activities. It is hard to find others who can invest with such "patience". Of course, the 13F filing reports only US stocks and does not include any international portfolios.
Timeline of $BABA stock purchases by DJCO:
- Q1 2021 - purchase of 165,320 shares
- Q3 2021 - purchase of 136,740 shares
- Q4 2021 - purchase of 300,000 shares
- Q1 2022 - sales of 302,060 shares
- Q2 2022 - no sales or purchases
From the above, it seems that Mr Munger sold the shares he bought in Q1 & Q3 of 2021.
In the case of Mr Munger, I have the following observations:
- Could this be tax loss harvesting as suggested by some analysts? Forbes defines tax loss harvest as the following:
Tax loss harvesting is when you sell some investments at a loss to offset gains you've realized by selling other stocks at a profit. The result is that you only pay taxes on your net profit, or the amount you've gained minus the amount you lost, thereby reducing your tax bill.
- Mr Munger is not one who would "rush" to take a position. He is happy to sit on cash - this is how you do not lose money. Thus, when he first bought BABA in Q1/2021, it would have been a price (with an adequate margin of safety built-in). Thus, if we look at Q1/2021, there is a range of 220.42 to 274.29. Being prudent, the price of $220.42 can be deemed as a good price as intrinsic value though the value is expected to be higher.
- As the price fell, the stock does appear to be even more "affordable" and "attractive".
- If BABA's fundamentals were affected, he could have sold all his shares and not kept the balance of 300,000 shares. While this is a 50% drop, it remains a sizeable proportion(19.50%) of his portfolio.
- Let us not forget that we buy for one reason and could sell for a million. Mr Munger is known to hold his assets into perpetuity and thus, it is definitely not a casual decision to buy and sell any of his positions.
- While we may have great respect for great investors like Mr Charlie Munger, it would be inappropriate if we just clone his trades without doing our own due diligence. Each of us has a different circle of competence, different risk-reward tolerance and also investing timeframe. Thus, blindly cloning another is not the best way to invest. The issue with 13F is that we do not get real-time buy or sell signals from the various investors. We could be months late when we got the updates on sales or purchases. Thus, we would not be able to execute in a timely fashion. Cloning using 13F may not be an ideal way.
- We will need to do our own due diligence to deep dive into the market & earnings report, look out for disruptive technologies and watch out for competition so that we can build up a strong case for our investing strategy.
From the 1W chart above for BABA, the stochastic indicator points to a downtrend whereas the MACD indicator still points to an uptrend. At the same time, EMA has yet to confirm the reversal to an uptrend. While there is a chance for the stock to go down further, the stock has reached a good range of fair value (based on the $220.42 above from Mr Munger). Personally, I have been adding the shares of BABA using Dollar Cost Averaging. Please do the due diligence of fundamentals analysis before we invest.
Comments
Post a Comment