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Breakdown of Charlie Munger's Portfolio 2022 - Daily Journal Corporation Investments - YouTube
Channel: fu academy
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It’s 13F season!
Many super investors
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have published their latest quarterly numbers.
And that gives us private investors an opportunity
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to have a look into their latest trades.
One of them is Charlie Munger - 98
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years old but still going strong.
He has a net worth of over $2bn.
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He’s the vice chairman of Berkshire Hathaway.
He is Buffett’s right-hand man.
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He’s also the Chairman of the Daily Journal which
is a newspaper but also has a sizable investment
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portfolio that Charlie Munger manages.
Let’s go!
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What’s up everyone?
This is fu
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academy - your channel for financial education.
And on this channel, I share lifestyle, investing
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style and educational videos - just like this one.
So if you are new here, consider subscribing.
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So first of all, how do I know
what stocks Charlie Munger bought?
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In the US, funds with at least $100m in assets
under management have to disclose their equity
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holdings every quarter.
And these have to be
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filed 45 days after each quarter.
I actually got this data from dataroma.com
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which collects investment information of
78 of the biggest investment companies,
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including Charlie Munger.
As always, I will leave
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a link in the description below.
So let’s see what Munger’s portfolio is about.
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The largest investment of Charlie Munger’s
portfolio is Bank of America - making up
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39.6% of the total portfolio.
It’s the second largest bank in
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the US with more than $2 trillion in
total assets - just behind JP Morgan.
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The bank has been investing
into their digital setup.
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Customers can access contactless ATMs and connect
with customer service through video calls.
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They also launched voice-assistant Erica,
which is already used by 19.5 million users.
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On top of that, they also launched digital
payments network Zelle which allows users to send
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real-time payments to family and friends.
In 2020, Bank of America made over $85bn in
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revenues, down 6% year-over-year, mainly driven by
a decrease in interest rates due to the pandemic.
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For banks, a lowering of interest rates is
bad because payments on loans is usually
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their main income stream.
88% of Bank of America's
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revenues were generated in the US, 5% in
Europe and the Middle East and 5% in Asia.
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The bank currently has a market cap of $330bn,
a PE ratio of 11 and a dividend yield of 2.05%.
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Similar to Buffett, Munger
loves banking stocks in general,
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but Bank of America is by far his favourite one.
Munger values a good management team - and he’s a
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big fan of Bank of America's CEO, Brian Moynihan.
He has transformed the bank after the 2008 Global
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Financial Crisis - making it more diversified
and investing into the bank's technology.
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The FED is expected to increase the Federal Funds
rate with up to 7 interest rate hikes this year.
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And banks could be one of the major
beneficiaries of rising interest rates.
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But the financial industry is changing quickly.
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FinTechs and new technologies like cryptos,
digital wallets and NFTs mean that banks
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will be challenged in the future.
But hey - what do you actually think?
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Are you comfortable investing in banking
stocks or do you try to avoid them?
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As always - let me know in
the comment section below.
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And in position number 2, we have Wells Fargo.
It makes up 29.5% of Charlie Munger’s
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total portfolio.
It’s the third
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largest bank in the US by total assets.
But number 1 in terms of number of branches
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and number of employees - ahead of JP Morgan.
In 2020, Wells Fargo made over $72bn in revenues,
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down 15% year-over-year, again, mainly
due to the low interest rate environment.
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55% of those revenues were generated from
net interest income, so the income from
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interest-bearing products like loans
and 45% from non-interest income.
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It currently has a market cap of $186bn, a
PE ratio of only 9 and a dividend yield of
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2.05%.
For me, after the 2017
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scandal the company has become uninvestable.
Also, in terms of customer satisfaction, Wells
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Fargo is repeatedly at the bottom of the rankings.
It’s the most hated bank in 10 US
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states - which is usually not the best sign.
Also, the bank is known to have outdated systems
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and tech - and that is incredibly complex and
difficult to update for financial institutions.
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Banks are in the circle of
competence for Charlie Munger.
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So I’m sure he knows the company
inside out and sees value in the stock.
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In position number 3, we have Alibaba.
It makes up 27.7% of Charlie
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Munger’s total portfolio.
That’s a stock that you wouldn’t really expect in
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the portfolio of one of the best value investors.
Alibaba is the largest online and mobile
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commerce company globally by GMV.
They operate China's most-visited online
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marketplaces, including Taobao and Tmall.
Then they also have Alibaba.com and
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AliExpress that operate globally.
But they are also one of the largest
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AI companies out there.
They also have a large
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cloud computing segment through AlibabaCloud.
They are also in mobile payments through Alipay.
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These guys have their hands
in pretty much everything.
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Last year, Alibaba made over $109bn
in revenues, up 40% year-over-year.
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Alibaba makes 71% of their revenues from China
commerce, 8% from cloud services, 7% from
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international commerce and 14% from others.
It currently has a market cap of $272bn,
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a PE ratio of 26 and no dividend yield
because it doesn’t pay out dividends.
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Alibaba came under pressure last year
when the Chinese government tightened
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regulations on their tech companies.
They blocked the IPO of Alibaba’s
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subsidiary Ant Group, which would
have been the largest IPO in history.
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On top of that, the government is forcing
Alibaba to pay $15bn for "common prosperity",
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which is just another additional tax.
Have a look at what Munger said about the
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political risk of investing in China at the 2022
Daily Journal Annual Meeting just a few weeks ago.
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In January, Jeff Gundlach was quoted: “China
is uninvestable in my opinion at this point.
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I've never invested in China long or short. Why
is that? I don't trust the data. I don't trust
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the relationship between the United States and
China anymore. I think that investments in China
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could be confiscated. I think there's
a risk of that.” End quote. Obviously,
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with a significant percentage of the Daily
Journal’s marketable securities invested in
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BYD and Alibaba, you feel differently.
Please explain why you are right. Well,
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of course, only the future knows who's going to
be right. But China is a big modern nation. It's
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got this huge population and this huge
modernity that's come in the last 30 years.
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And we invested some money in China because
we could get more value in terms of the
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strength of the enterprise and the price of the
security than we could get in the United States.
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So yes, there is political tension in China.
But also a massive push towards modernisation.
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And Munger believes that he can get more
value for money in China than in the US.
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According to Munger, they are simply better
businesses relative to their valuations.
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So despite political uncertainty, he
still believes in China and Alibaba.
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So much so that he doubled down
on his investment, adding 100% to
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his existing position in the last quarter.
He still believes in the fundamentals of the
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business and the strategic importance of China.
Also, in the last quarter, the stock dropped by
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over 60% compared to its peak in October 2020.
So I’m not surprised that he doubled-down on this
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stock in line with his and Warren Buffett’s
motto: Be greedy when others are fearful.
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And in position number 4, we have
US Bancorp, also known as US Bank.
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And yes, it’s another bank!
It makes up 3.0% of Charlie
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Munger’s total portfolio.
It’s the fifth largest bank
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in the US by total assets.
Last year, US Bank made over
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$22bn in revenues, down 2% year-over-year.
55% of those revenues were generated from
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net interest income, so the income
from interest-bearing products
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like loans and 45% from non-interest income.
It currently has a market cap of $81bn, a PE ratio
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of 10 and a dividend yield of 3.33% - the highest
of all bank stocks that Charlie Munger owns.
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US Bank is a well-run business.
Compared to its competitors, it has strong KPIs.
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Their return on assets and return on
equity are only second to JP Morgan.
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But US Bank is also struggling
with outdated technology.
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And that’s why the bank is heavily
investing into the fintech space.
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It actively acquires smaller FinTechs
like travel and expense management
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platform TravelBank, for example.
On top of that, it also invests
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in fintech venture capital firms that
invest in fintech startups themselves.
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Last but not least: In position
number 5, we have POSCO.
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It makes up 0.2% of Charlie
Munger’s total portfolio.
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POSCO is a South Korean steel-maker.
POSCO stands for Pohang Iron and Steel Company
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It’s ranked number 6 globally in
terms of tons of steel production.
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In 2020, POSCO made over 57tn in
revenues - that’s in South Korean Won.
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That’s around $47bn, down 10% year-over-year.
It currently has a market cap of $18bn, a PE ratio
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of only 3 and a dividend yield of whopping 6.07%.
It’s a stock that’s in the circle of competence of
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Munger, similar to banks and insurance companies.
Back in 2008, Munger said about POSCO that it’s
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“the best steel company in the world and I
think number two is a significant step behind.”
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Berkshire also held a stake
in POSCO, but sold it in 2015.
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I’m not too familiar with this stock
or the steel production industry in
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general to give a deeper insight.
For that, the position is also not
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large enough to really make an impact.
There you have it: A breakdown of Charlie
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Munger's Portfolio at the Daily Journal.
In total, that portfolio is worth around
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$250m - so it’s small and niche.
But it’s still great to see
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what he holds and why he holds it.
Charlie Munger definitely stays in his
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circle of competence: US banks make
up a total of 72% of his portfolio.
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But still, his position in Alibaba is surprising.
But what do you actually think of this portfolio?
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Would you feel comfortable holding Alibaba?
Do you believe in US stocks only?
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As always - let me know in
the comment section below.
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I hope that this video could
bring some value to you.
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If you liked what you saw and you want to support
this channel, then please make sure you subscribe.
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Thank you very much for doing that - and peace!
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