• Charlie Munger called Alibaba one of his worst investments before he died in November 2023.
• Warren Buffett's late business partner may have been too harsh, as the stock has soared 74% since then.
• As Daily Journal's chairman, he built a $72 million stake that made up nearly 30% of its portfolio.

Charlie Munger labeled his Alibaba wager one of the worst mistakes of his career shortly before he died. The legendary investor may have been too hasty in writing off his last big bet.

A broader Chinese tech rally has boosted Alibaba stock by 56% this year, and 74% since Munger's death in November 2023. The e-commerce giant's shares have rallied to their highest levels since November 2021, although they still trade at less than half their October 2020 peak.

Munger, Warren Buffett's right-hand man and Berkshire Hathaway's vice-chairman for more than 40 years, invested both his family's money and some of Daily Journal's spare cash in Alibaba.

Daily Journal is a newspaper publisher and legal software supplier that Munger chaired from 1977 to 2022. Starting in 2009, he grew its stock portfolio from scratch to be worth more than $300 million.

Munger bought 165,000 American depositary shares (ADS) of Alibaba for the company in the first quarter of 2021, marking the first new addition to its US stock portfolio since at least the end of 2013.

Even as Alibaba's stock price nearly halved that year, the billionaire raised the stake to about 602,000 shares worth $72 million at the end of 2021, accounting for 28% of the US stock portfolio's total value.

Munger shifted gears the following quarter, paring Daily Journal's holding to 300,000 shares. That position remained intact until after the investor died, just a few weeks shy of his 100th birthday.

In the first quarter of 2024, Daily Journal cut the stake to 195,000 shares worth $16.5 million at the end of March that year, and it was still that size at the end of December, Securities and Exchange Commission filings show.

Owning up to mistakes

In the same quarter that Munger began buying Alibaba, he scolded cofounder Jack Ma for publicly criticizing the Chinese government, calling him "very arrogant."

Following Ma's comments, authorities nixed a planned initial public offering for Alibaba's mobile payments affiliate, Ant Group. They also demanded Ant restructure its business and hit Alibaba with billions of dollars in antitrust penalties. Meanwhile, Jack Ma disappeared from public view.

Munger intentionally rubbed his nose in his missteps to avoid making similar ones in the future. So it's unsurprising that he openly described Alibaba as a terrible error.

"I regard Alibaba as one of the worst mistakes I ever made," Munger said at Daily Journal's annual meeting in February 2023.

"I got charmed by the idea of their position in the Chinese internet. I didn't stop to realize they're still a goddamn retailer," he continued. "It's going to be a competitive business, the internet — it's not going to be a cakewalk for everybody."

In his final TV interview in late 2023, Munger said: "My worst trade was buying a block for the Munger family in Alibaba, which is a pretty good company. But I think it got overhyped, and Jack Ma made mistakes in dealing with the Chinese government. Everybody has some bad ones. The greatest tennis player goes out there some days to the center court and has a bad day. It happens."

Winners and losers

Alibaba has proven to be less disastrous than Munger feared, and may even turn out to be a winner. Even if it doesn't, he has other stellar bets to hang his hat on.

For example, he pitched BYD to Buffett, resulting in Berkshire paying $232 million for 225 million shares of the Chinese EV maker in 2008. BYD's stock price has surged from the Hong Kong dollar equivalent of $1 then to record highs of above $50 in recent days.

Berkshire cut its stake from about 20% in 2022 to under 5% by mid-2024, and may have exited the bet completely. If untouched, those 225 million shares would be worth more than $11 billion.

Even though it cashed out, Berkshire likely made well over 20 times its money based on BYD's trading range during its selling timeframe.

Munger may have died believing that investing in Alibaba was a bad decision when it wasn't. Even if he was wrong to buy in, he's knocked it out of the park with bets like BYD.

• A friend of Charlie Munger's says Munger doubled his money on a contrarian bet soon before his death.
• The friend, Li Lu, gave an interview in which he discussed Munger's careful approach to investing.
• Li also described dramatically different approaches to risk tolerance between Munger and Elon Musk.

Charlie Munger was still sniffing out bargains and scoring big gains at age 99, says a close friend of the late investing icon.

Munger, Warren Buffett's business partner and Berkshire Hathaway's vice chairman for more than four decades, died in late November 2023, about a month shy of his 100th birthday.

In a rare interview marking the first anniversary of Munger's death, Li Lu told the Chinese social network Zhenge Island that one of Munger's last moves was a contrarian bet.

"There was a stock that everyone disliked, and it might not be particularly politically correct," Li said. But that didn't stop Munger from studying the company and buying its shares, continued the Himalaya Capital Management founder, whom Munger once described as the "Chinese Warren Buffett."

"The week before he died, this stock had doubled from the time he started investing to that time," Li said. It's unclear which stock he was referring to. Li didn't immediately respond to a request for comment from Business Insider.

Li said the wager showed Munger retained his passion for investing until the end and "could still go against the market consensus and live to see this stock double." He said the stock remained "in the Munger family portfolio" and was "still performing very well."

Li was the only person apart from Buffett who Munger trusted to invest his family's money. He introduced Munger to BYD, the Chinese EV maker that's been one of Berkshire's best investments over the past decade.

Describing Munger's careful approach toward investing, in his interview with Zhenge Island he also seemed to allude to a story Munger had discussed at Daily Journal's annual meeting in 2017, saying Munger "read Barron's magazine every week for 50 years and only made one investment."

"In 50 years I found one investment opportunity in Barron's, out of which I made about $80 million with almost no risk," Munger said in 2017. "I took the $80 million and gave it to Li Lu, who turned it into $400 to $500 million. So I have made $400 to 500 million out of reading Barron's for 50 years and following one idea."

Munger added further details, indicating that the stock was an auto supply company named Tenneco that Apollo Global Management acquired in late 2022. He said that he made 15 times his money on the stock in about two years and that it took him only 90 minutes of research to pull the trigger after reading about it.

Lunch with Elon Musk

Li recalled a lunch with Munger and Elon Musk in which he said the Tesla and SpaceX CEO tried to win Munger's investment. He said the discussion showed their similar thinking on subjects such as batteries and science but also their stark differences in risk appetite. While Musk was willing to do things with only a 5% chance of success, he said, Munger "may need more than 80% chance of success before he will do it."

Musk has previously discussed meeting Munger. Early in 2023 he posted on X that "Munger could've invested in Tesla at ~$200M valuation when I had lunch with him in late 2008." Musk's automaker went on to become one of the world's largest companies and is now worth about $1.3 trillion.

"I was at a lunch with Munger in 2009 where he told the whole table all the ways Tesla would fail," Musk wrote in another post. "Made me quite sad, but I told him I agreed with all those reasons & that we would probably die, but it was worth trying anyway."

Correction: January 7, 2025 — This story was updated to reflect that it wasn't clear from Li Lu's interview where Charlie Munger got the idea for the contrarian bet that Li said Munger made at age 99. The story also misstated when Elon Musk posted one of his comments about Munger. It was in early 2023, not early last year.