The late Charlie Munger said investing in Alibaba was a huge mistake. He might have been wrong.

• 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.