Why Charlie Munger Continues to Buy Alibaba Stock | Summary and Q&A

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October 11, 2021
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Why Charlie Munger Continues to Buy Alibaba Stock

TL;DR

Daily Journal, led by Warren Buffett's business partner Charlie Munger, buys a large position in Alibaba despite concerns about China's government policies and crackdown on businesses. Munger is optimistic about China's future and expects the economy to continue growing.

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Key Insights

  • 👻 China's remarkable economic growth and transformation have allowed businesses to flourish and lifted millions of people out of poverty.
  • 👔 Alibaba's success is closely tied to China's economic growth, and its impressive financial growth numbers make it an attractive investment.
  • 🧑‍🏭 The company's competitive advantages in e-commerce, logistics, and finance contribute to its market dominance and act as a barrier to entry for competitors.
  • 🌥️ China's large population and potential to improve GDP per capita make it an attractive market for investors.
  • 🍉 Despite concerns about China's government policies, investors like Charlie Munger and Warren Buffett remain optimistic about Alibaba's long-term prospects.
  • ❓ The Chinese government's crackdown on certain industries has created uncertainty and affected investor sentiment towards Alibaba.
  • 🥺 Alibaba's stock price decline has led some investors to perceive it as undervalued compared to other tech companies, presenting a potential buying opportunity.

Transcript

the daily journal recently bought a large position in alibaba after founder jack ma had been reprimanded by the chinese communist party and ma's other company ant was not allowed to proceed with its ipo what are your current thoughts on china and whether the communist leaders will allow businesses with strong leadership to flourish in decades to co... Read More

Questions & Answers

Q: Why did the Daily Journal increase its stake in Alibaba despite concerns about China's government policies?

Charlie Munger, known for his long-term investment approach, believes in the growth potential of China's economy and Alibaba's strong competitive position.

Q: What factors contribute to Alibaba's attractiveness as an investment opportunity?

Alibaba has experienced impressive revenue, free cash flow, and earnings per share growth over the past decade. It also possesses strong competitive advantages and is considered undervalued compared to other big tech companies.

Q: How has the Chinese government's crackdown on certain industries affected Alibaba?

The Chinese government's policies, such as the ban on profitable online tutoring companies, have raised concerns about Alibaba's long-term profitability. Additionally, the government's interference led to the suspension of Ant Group's IPO, in which Alibaba has a stake.

Q: Why are investors like Charlie Munger still confident in the future of Alibaba despite government crackdowns?

Munger believes that the Chinese government has already sent a clear message and extracted its pound of flesh, and it is unlikely to further harm Alibaba's prospects. He also sees potential value creation in Alibaba's cloud segment.

Summary & Key Takeaways

  • The Daily Journal, managed by Charlie Munger, increased its stake in Alibaba by 83% in the last quarter, defying negative sentiment and concerns about the Chinese government's actions.

  • Munger believes China's economy will continue to grow and has witnessed the country's remarkable transformation over the years.

  • Alibaba's high growth rate, strong competitive advantages, and undervalued stock price make it an attractive investment opportunity.

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