Charlie Munger's Daily Journal spent $118 million on stocks in 6 months - and took out $43 million of margin debt to help fund the purchases




charlie munger
charlie munger  
  • Charlie Munger's Daily Journal spent $118 million on stocks in the six months to March 31.

  • The investor sold $81 million of stock, and borrowed $43 million on margin to make the purchases.

  • Daily Journal likely cashed in some BYD shares, and sold half of its Alibaba stake at a loss.

Charlie Munger's Daily Journal piled $118 million into stocks in the six months to March 31, Securities and Exchange Commission filings show.

The newspaper publisher and legal-software supplier funded the purchases by cashing out $81 million of other stocks, and borrowing $43 million from its margin-loan account, in the period.

Munger is best known as Warren Buffett's business partner and the vice-chairman of Berkshire Hathaway. However, the 98-year-old investor was also Daily Journal's chairman for 45 years before stepping down in March. He's still a director, and continues to oversee the company's investments.

Daily Journal's stock portfolio shrunk in value by 10% to $355 million last quarter, but its unrealized gains only dipped by $8 million to $200 million, meaning the business has more than doubled its money on paper.

Munger and his team appear to have sold some of their BYD stock in the three months to December, as they realized a $47 million gain on $50 million of shares sold in that period - an astounding 15-fold return. They halved their Alibaba stake last quarter, realizing a $33 million loss on $31 million of shares sold, as a result of the e-commerce stock's roughly 50% decline in the year to March.

Notably, Daily Journal secured another $6 million in margin debt in March, after tapping its account for $37 million in December. Overall, it invested a net $37 million in stocks in the six months to March 31, as it spent $118 million and sold $81 million worth of equities.

Buffett's right-hand man was asked during Daily Journal's annual meeting in February why he was risking the company's capital by investing it, and why he was using margin debt after repeatedly warning of the dangers of leverage.

Munger explained that he prefers to hold stocks instead of cash, which loses value if the dollar weakens or prices rise, and he doesn't view a small margin loan as reckless.

"On balance, we prefer the risks we have to those we're avoiding, and we don't mind a tiny little bit of margin debt," he said.

Daily Journal's stock portfolio dwarfs the rest of its business. The company earned only $11 million in revenue and $373,000 in operating income last quarter.

On the other hand, Berkshire operates on a totally different scale to the publisher. For example, Buffett's conglomerate spent a net $41 billion on stocks in the first quarter of this year, and its equity portfolio was worth more than $350 billion at the end of December.

Read more: Insider interviewed the CEOs of See's CandiesDairy QueenBorsheims, and Brooks Running during Berkshire Hathaway's annual meeting. They offered a look inside Warren Buffett's company, and shared how they're dealing with the pandemic and inflation.

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