Charlie Munger Portfolio Analysis

Charlie Munger’s Portfolio Analysis (October 2021)

Last Updated on October 9, 2021

Our famous Superinvestor, Charlie Munger, is usually among the first Superinvestors to showcase his 13F filling. His company, Daily Journal Corporation invested in something very interesting in Q3 2021. Other than this “big” bet Charlie made, nothing changed in comparison with his portfolio holdings in Q2 2021. In Charlie Munger’s portfolio analysis I will analyze all of his holdings, which he doesn’t have much – five holdings in total.

For those wondering why Charlie Munger is interesting as a Superinvest, the reason is obvious. Charlie Munger is the vice-chairman of Berkshire Hathaway and Buffett’s right-hand man. It is very likely that all the decisions made by Charlie were partly influenced by Warren Buffet and Berkshire Hathaway. I think this should create enough interest to study the actions of such value investors.

So, let’s start with the only and most interesting change that Charlie made in his portfolio in Q3 2021 comparing with his positions held in Q2 2021.

Charlie Munger Bought More of Alibaba Stock

As you may have already guessed, Charlie Munger bought more of Alibaba stock. The decision was probably the work of both Charlie Munger and Warren Buffett.

In the filing, The Daily Journal disclosed that its stake in Alibaba had risen from 165,320 shares at the end of the first quarter to 302,060 shares at the end of the second quarter. An increase of 82.71% is nearly double that Munger previously owned. The company’s stake in Alibaba now totals about $44,72 million which is almost 20% of the Daily Journal’s total portfolio as of September 30, 2021.

In the graph below you can see the period in which Munger bought the shares of Alibaba. The highest price was $221.87 and the lowest was $157.46.

Recent bad news stroke Alibaba’s share price even further. Regulators in China ordered Alipay to separate into three different companies. Alipay, owned 33% by Alibaba, is an important business segment of Alibaba. It combines a digital payments platform and other traditional financial products. For example loans, wealth management, and insurance.

According to Financial Times, regulators have said they will also require these products to be in an entirely separate app. This doesn’t have to affect Alibaba that much. However, it can create some difficulties in growth. But what certainly happened was that after this news the stock started falling again.

For a full analysis of Alibaba, see the article at the following link: Should You Buy Alibaba Stock in 2021.

The Largest Charlie Munger’s Holdings are in Financial Sector

With this position, we can already conclude that Charlie Munger firmly believes in the financial industry, especially banks. All banks make up as much as 80% of his total portfolio. It is interesting that all three banks that Charlie holds are also part of Warren Buffet’s portfolio, in a smaller or larger percentage.

Bank of America Makes the Largest Position

With a total value of $97 million, accounting for as much as 43.35% of the portfolio, Bank of America makes the largest position in Charlie Munger’s portfolio analysis.

Bank of America has been operating very well in the post-financial-crisis era. In recent years, the bank had several successful operations. The company focused on building efficiency and massively increasing its loan portfolio. It also built new technology associated with its online business segment. Bank of America has a pretty high concentration of deposits that don’t pay interest (37% of total deposits), the bank is in a strong position among its competitors.

Bank Wells Fargo Takes the Second Place

Wells Fargo accounts for 32.80% of the total portfolio. The bank operates as a diversified financial services institution. The Company provides banking, other services such as insurance, investments, credit cards, mortgage, leasing and consumer finance. The bank has a strong balance sheet structure, with plenty of total noninterest deposits. This means that bank can get money cheaply and therefore improve profitability.

Third Bank Is U.S. Bancorp With Only 3.69% of the Portfolio

The fourth place on Charlie Munger’s portfolio takes the third bank – U.S. Bancorp, but it makes up only 3.69% of the portfolio.

U.S. Bancorp is mostly a commercial bank. The bank produces some of the most impressive profitability and efficiency metrics in the sector. The bank gets almost all money from deposits. It doesn’t have to take other financing dent instruments with high interest. It has good dividend stock for investors. Since U.S. Bancorp’s main operations are a traditional bank, its profitability and revenue tend to be more predictable and secure.

Posco Investment

Another investment that Charlie has is in Posco. He holds 0.3% of his portfolio in this company. That accounts for $672 thousand. This South Korean company manufactures various types of steel products. Its products are mainly produced for automobile, construction, and shipbuilding industries.

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *