What was the core logic behind Charlie Munger's decision to invest in Alibaba through the Daily Journal?
Hey, you asked about Charlie Munger's decision to invest in Alibaba. It's quite interesting. I'm no expert, but as a veteran investor, I've followed Munger and Buffett's thinking for years. Munger bought Alibaba stock in 2021 through Daily Journal Corp. (a small newspaper company he oversaw), and later added to his position when the stock plunged. This reflects his value investing style—focusing on the long term, not chasing trends. Let me briefly explain his core logic in plain language, like we're chatting—nothing too academic.
1. Focus on Business Fundamentals, Not Short-Term Noise
Munger invested in Alibaba primarily because he saw an exceptional company. As China’s e-commerce leader—akin to Amazon plus eBay in the U.S.—Alibaba controls massive user networks and data. Munger believed it had a wide "moat": advantages hard to replicate, like the network effects of Taobao and Tmall (where more users make the platform more valuable). He ignored short-term negatives, such as Chinese regulatory crackdowns (like antitrust probes) or U.S.-China trade tensions. To him, these were temporary noise that wouldn’t destroy Alibaba’s core business. Simply put, he approached it like buying real estate—valuing location and structure over minor cracks in the wall.
2. Buy When Undervalued, Insist on a Margin of Safety
A staunch value investor influenced by Buffett, Munger bought Alibaba when its stock had fallen significantly from its peak (purchased in early 2021, with its market value halved). He felt the market was overly panicked, pricing the stock far below its intrinsic value. This is the "margin of safety"—buying cheap enough to limit losses even if things go wrong. Munger often says investing is like poker: only bet when you have strong cards. He believed Alibaba’s long-term earnings power (e.g., cloud computing and global expansion) was underestimated, so he acted decisively. For everyday folks, think of it as buying quality goods on sale, not chasing hot items at peak prices.
3. Contrarian Mindset: Be Greedy When Others Are Fearful
This is classic Munger. When Alibaba’s stock crashed in 2021 and fears over China’s policy risks spiked, he increased his position (as shown in Daily Journal’s filings). Quoting Buffett, he lives by: "Be fearful when others are greedy, and greedy when others are fearful." Munger doesn’t follow the herd; he sees emotional markets as opportunities to buy bargains. Confident in China’s economy, he viewed Alibaba as a national champion unlikely to collapse. Like his bet on BYD, Munger embraces emerging-market potential despite risks.
4. Hold Long-Term, Ignore Volatility
Munger invests in businesses, not stocks. He held Alibaba for years without flinching as shares dropped from $200+ to $70+ (still holding into 2023). His logic: great companies prove themselves over time. Nearing 100, Munger has weathered countless market crashes—he knows short-term swings are normal; what matters is a company’s enduring profitability. Advice for regular investors: Don’t obsess over daily stock prices. Treat it like planting a tree; wait patiently for it to grow.
In short, Munger’s decision wasn’t luck—it was grounded in assessing the company, price, and human psychology. He never detailed this investment publicly (Munger is famously low-key), but his logic shines through in his speeches and Daily Journal’s actions. Yes, investing carries risk: Alibaba later fell sharply due to policy shifts, and Munger lost money. But his style is clear: he seeks enduring victory over quick wins. If you want to learn value investing, start with Munger’s book Poor Charlie’s Almanack—it’s packed with this wisdom. Ask me if you have more questions!