There is such a thing as a free lunch. Every quarter the 13Fs of some of the greatest investors in the world are released to the public. From this filing, the public can see what stocks the investor bought and what they sold. It is a great resource for anyone wanting to imitate super investor trades. Companies bought by these great investors have already passed through their filters, which is a good indication of their strength.
Stocks Charlie Munger owns:
- Berkshire Hathaway (BRK.A)
- Costco (COST)
- Himalaya Capital
- Bank of America (BAC)
- Alibaba (BABA)
- The Daily Journal Corporation (DJCO)
Berkshire Hathaway (BRK.A)
Berkshire Hathaway is an American multi-industry holding company headquartered in Omaha, Nebraska, and is operated by Chairman Warren Buffett and Vice-Chairman Charlie Munger. Berkshire Hathaway is in the top ten largest companies in the world and the largest financial services company by revenue. The types of industries Berkshire Hathaway holds are incredibly diverse; Insurance, consumer electronics, food manufacturing, furniture, jewelry, underwear, railroads, TV network, and the list goes on.
Charlie Munger became the Vice-Chairman of Berkshire Hathaway in 1978. The majority of Munger’s net worth is in Berkshire Hathaway stock. The biggest strength of Berkshire Hathaway by far is its management. Probably two of the greatest and wisest managers, Warren Buffett and Charlie Munger, in businesses run the company. They have built a company culture over many decades that is open, honest, hard-working, and rooted in good ethics. They have set an example of how companies should be run, how resources should be allocated, and how to attract the best people for positions. They have built a culture that will last a very long time after they leave. Buffett and Munger are also master negotiators; when they find a great company, they can often persuade management to accept their offers without overpaying. They have built a shareholder-first mentality where they never lose sight of who Berkshire’s owners are and only make decisions based on what is best for the owners. Shareholders become part of a family and often become lifetime owners.
Costco (COST)
Costco is the second-largest brick-and-mortar retailer by revenue in both the U.S and the world and the third-largest retailer by revenue in the world, including eCommerce. The company has a reputation for offering good quality food, soft lines (e.g., clothes and linen), and hardlines (e.g., electronics and hardware) at affordable prices. It is a members-only store that sells bulk items in a warehouse setting.
Costco provides some protection against inflation. With inflation being the top concern for many Americans, consumers are becoming increasingly price-conscious. Costco is one of the best places in the country to purchase quality products at a low price due to its bulk purchase model. Despite the inflationary headwinds, Costco is well positioned to maintain consistent earnings in the years to come.
Himalaya Capital
Not a stock but a venture capital fund, a large percent of Charlie Munger’s wealth is managed by Li Lu at Himilaya Captial. Li Lu, whom some may call the Chinese Warren Buffett, is the manager of Himalaya Capital Management. In 1989 he fled China to move to the US to study at Columbia University, where he learned about value investing. While at Columbia, he invested his scholarship money and grew it to $1 million. Now he manages over $2 billion and primarily focuses on publicly traded companies in China. He aims to achieve superior returns by being a long-term owner of high-quality businesses with economic moats. Since Himalaya Capitals’ inception in 1998, the fund has an impressive compounded annualized return of 30% compared to the S&P 500’s return of 8% during the same period.
Bank of America (BAC)
Bank of America is an American multinational financial services and investment bank based in Charlotte, North Carolina. It is the second largest bank in the United States, after JPMorgan Chase. It is the eighth largest bank in the world by assets under management (AUM). Its main services include investment banking, wealth management, and commercial banking.
Bank of America has the largest market share of domestic deposits, serving around 10% of all American bank deposits. This gives it a great competitive advantage over all other banks because banks generate a large percentage of their income from borrowed money at low short-term interest rates and then invest into higher-yielding assets. Deposits are the cheapest form of funding for the bank.
Alibaba (BABA)
Alibaba is a Chinese-based e-commerce giant which is a combination of Amazon, eBay, and Paypal. It has four e-commerce arms; Alibaba (domestic wholesale business to international consumer), AliExpress (domestic small business to global consumer, Tmall (domestic business to domestic consumer, and Taobao (domestic consumer to domestic consumer). Alibaba aims to connect consumers, entrepreneurs, and enterprises worldwide by creating platforms facilitating transactions between parties. It aims to be open and transparent to build trust amongst its users. Alibaba’s primary source of revenue is from commissions and fees for services on its eCommerce platforms and advertisements. It also has a second, rapidly growing arm; cloud. Its markets share is already the third-largest behind Amazon and Microsoft. And while still a relatively new venture compared to Amazon’s AWS, it only accounts for 10% of its revenue.
Alibaba is in an incredible position. They have an incredible moat that is unmatched in Asia and has great tailwinds from China and its rapidly growing middle class. They also have enormous barriers to entry, even more so than some US tech. And, despite the crackdowns from the Chinese government, it is unlikely that they will continue as Alibaba is such a large source of employment and GDP growth for the country. Furthermore, Alibaba has only just started getting into the cloud business, which will have a huge potential for growth in the future. The cloud margins are very large, and only a few companies have the ability to compete in the space.
The Daily Journal Corporation (DJCO)
The Daily Journal Corporation is an American publishing and technology company founded in 1986 and headquartered in Los Angeles, California. The company publishes newspapers and websites reporting California and Arizona court and legal news. It also owns Journal Technologies which develops software for trial and appellate courts.
Its technology arm is the only system permitted to provide an official case management system in California. Its system is a highly configurable processing engine that offers document management and e-filing. Because of its exclusivity, it has the ultimate competitive advantage where no other businesses are allowed to enter the space.
