DJCO - Daily Journal Corporation

[Anglozurich]

Ah damn. i misread. thats my friday night in europe ruined. was looking forward to it all week. haha. Sorry guys. cheers

[wabuffo]

The new DJCO 10-Q is out.

 

What's interesting is that Munger used some of the proceeds from the stock sales we are talking about to pay down almost half of the margin account borrowing.  This borrowing was used to buy the two software companies years ago. 

 

Why do that?  Why now?  Hmmm.

 

wabuffo

[coc]

 

quod erat demonstrandum.

 

wabuffo

 

Crossing it against the BHE position in BYD is clever. You da man.  8)

[wabuffo]

https://www.sec.gov/Archives/edgar/data/783412/000143774921008249/xslForm13F_X01/rdgit040521.xml

Huh - Munger's Daily Journal owns $37m of BABA as at 3/31/21.   Obviously, bought it during the Q so its a new position.

wabuffo

 

Edited April 5, 2021 by wabuffo

[Fitz]

Well, that's interesting for a few reasons:

 

First, his chinese investing guru Li Lou took a new position in Pinduoduo at the same time he was entering into BABA. I would also have a hard time paying almost 20x price to sales for PDD. But interesting.

 

Second, I remember at a DJCO annual meeting I attended a few years back someone asked him about buying the BYDDY shares and he said he wouldn't touch the ADR. I took this to mean he was not a fan of the chinese ADRs in general, wonder why he chose to purchase his BABA through the sponsored ADR and not the listed shanghai ticker as he did with BYD.

 

Third, makes me feel a little warm n fuzzy that I was starting a position at the same time as God. 

 

-Fitz

 

 

 

 

[wabuffo]

It's also interesting for a fourth reason.  Where did he get the cash to buy it?  Its FMV is $37m at quarter-end which is also near the stock's low price for the Q.  He almost certainly spent more than $37m to buy the BABA shares.

DJCO's starting cash balance for the Q was $9.6m and the core biz doesn't generate that kinda cash in a single quarter.  He didn't sell any of the US-listed stocks (we know this since there were no changes in that same 13F-HR).  I doubt he added close to $30-$35m to the investment margin account that he has at DJCO.

So he must've sold some 1211.HK (BYD) to pay for it.  

IIRC, someone asked him point blank at the DJCO AGM what he was going to do with BYD's huge paper gains.  I guess we have part of our answer now.   I will be able to confirm it in early May when the 10-Q comes out.

wabuffo

[Fitz]

very interesting indeed... would be odd if he paid off the margin account and a few months later loaded it back up.

I'm not sure the individual cost basis on his investments in DJCO, by January 2021 charts you had up with 51 mil in total cost basis this would be the largest single investment by far on the cost side. 

BYD was also selling shares during the run up, so at least the company benefited from the speculative frenzy around it with cheap cost of capital. 

Also, I must tip my hat to you Wabuffo, your a DJCO and banking sector gold mine, I always enjoy your posts. 

 

-Fitz

 

[DollarKing]

3 hours ago, Fitz said:

Second, I remember at a DJCO annual meeting I attended a few years back someone asked him about buying the BYDDY shares and he said he wouldn't touch the ADR. I took this to mean he was not a fan of the chinese ADRs in general, wonder why he chose to purchase his BABA through the sponsored ADR and not the listed shanghai ticker as he did with BYD.

From memory the BYDDY ADRs are unsponsored.

The Alibaba ADR's are sponsored and the company will exchange them for eight of the H Shares if you request it. Some people have been doing this in bulk. There has been a slight discount on the ADRs to the H shares since the Hong Kong listing.

[Thelilyinvestor]

Taking into account Charlie is not the biggest fan of ADRs, the recent problems of Alibaba with the Chinese Government and that Charlie just buys no brainers, he must be suuuuper bullish on Alibaba and that they will keep growing at this fast pace for a long time

[MattR]

6 hours ago, Thelilyinvestor said:

Taking into account Charlie is not the biggest fan of ADRs, the recent problems of Alibaba with the Chinese Government and that Charlie just buys no brainers, he must be suuuuper bullish on Alibaba and that they will keep growing at this fast pace for a long time

He is in close contact with Li Lu -  I wonder how much he influenced this decision.

[mwtorock]

1 hour ago, MattR said:

He is in close contact with Li Lu -  I wonder how much he influenced this decision.

Li Lu did own some BABA before, and I think he got out before the trouble hit. It will not be surprise to see him to go back this quarter too, but will need to wait for 13F for public data.

[MattR]

9 minutes ago, mwtorock said:

Li Lu did own some BABA before, and I think he got out before the trouble hit. It will not be surprise to see him to go back this quarter too, but will need to wait for 13F for public data.

He kinda is a wizard, so there is a chance that he bought in when it hit 222-224.

[Monsieur_dee]

1 hour ago, MattR said:

He kinda is a wizard, so there is a chance that he bought in when it hit 222-224.

Not questioning the man's greatness but anybody else think some of li lu us investments have been a bit peculiar as of late? Buying Baba then selling, buying FB then selling, buying apple? Or am I being too narrow minded. 

[Thelilyinvestor]

Yes they are a bit weird to me too, looks like a trader a bit (hahaha)

I have been studying Li Lu for a while now, he seems to buy small stakes in companies so he can study them deeply (with the mental model of: "after you buy is when you start learning about the company") and then keeps adding if they convince him more and sell the ones that dont.

I think the best way to clone Li Lu is just to clone his top investments, like Micron, BYD, Postal Savings Bank of China, etc (5%+ stake in the company), his high conviction bets.

[MattR]

4 hours ago, Thelilyinvestor said:

Yes they are a bit weird to me too, looks like a trader a bit (hahaha)

I have been studying Li Lu for a while now, he seems to buy small stakes in companies so he can study them deeply (with the mental model of: "after you buy is when you start learning about the company") and then keeps adding if they convince him more and sell the ones that dont.

I think the best way to clone Li Lu is just to clone his top investments, like Micron, BYD, Postal Savings Bank of China, etc (5%+ stake in the company), his high conviction bets.

Yes, he buys small stakes in companies he likes but hasn't done his "extreme analysis" on. After that he either adds or sells. It sometimes looks like he is a trader, but after he has a small stake in the company he follows news, filings, while also going more in depth. I think it is an extremly good approach.

[Monsieur_dee]

You're right actually. I do remember him talking about that during his lecture. I think Warren & mohnish have said the same thing. I guess it does force you to be more thorough. 

[Thelilyinvestor]

7 hours ago, Monsieur_dee said:

You're right actually. I do remember him talking about that during his lecture. I think Warren & mohnish have said the same thing. I guess it does force you to be more thorough. 

Tom Gayner has the same approach at Markel, I believe he has 100+ stocks with less than 0,5% and then 6 or 7 stocks make up 50%+ of the portfolio. He buys a lot of companies and then makes a big position very rarely...

I believe Mohnish Pabrai called this farm investing.

[AJDelphi]

On 4/5/2021 at 5:25 PM, wabuffo said:

It's also interesting for a fourth reason.  Where did he get the cash to buy it?  Its FMV is $37m at quarter-end which is also near the stock's low price for the Q.  He almost certainly spent more than $37m to buy the BABA shares.

DJCO's starting cash balance for the Q was $9.6m and the core biz doesn't generate that kinda cash in a single quarter.  He didn't sell any of the US-listed stocks (we know this since there were no changes in that same 13F-HR).  I doubt he added close to $30-$35m to the investment margin account that he has at DJCO.

So he must've sold some 1211.HK (BYD) to pay for it.  

IIRC, someone asked him point blank at the DJCO AGM what he was going to do with BYD's huge paper gains.  I guess we have part of our answer now.   I will be able to confirm it in early May when the 10-Q comes out.

wabuffo

Do we know when he sold the Hyundai Preferred's and what he did with those proceeds? Saw that they mentioned a Korean security in the 2019 10-K but not in the 2020 10-K

[wabuffo]

Do we know when he sold the Hyundai Preferred's and what he did with those proceeds? Saw that they mentioned a Korean security in the 2019 10-K but not in the 2020 10-K

I'll spare you the gory details -- but the sale of $16.3m of two marketable securities happened during July-Sep Q, 2020. 

We don't the FMV of each sale - but we can figure out that Munger sold $10.2m of adjusted cost basis of the Hyundai preferred 3 security (basically all of it) and $1.9m of adjusted cost basis of BYD (or ~13% of DJCO's holdings of that security).

wabuffo