In the aftermath of renowned investor Charlie Munger‘s death in November, the Daily Journal Corp. DJCO has cautioned its shareholders about the likelihood of lower future returns, saying it's "impossible to ever replace" Warren Buffett's investment partner.
What Happened: Munger, who was known for being Buffett‘s confidant and the vice-chairman of Berkshire Hathaway Inc. BRK BRK, led the Daily Journal for around 45 years. He initiated the strategy of investing the publisher’s surplus cash into the stocks of other enterprises during the height of the financial crisis.
“Although the Board will work to ensure that the portfolio remains well-managed, it’s impossible to ever replace Mr. Munger," the journal said.
The Daily Journal spelled out its warning in a filing with the Securities and Exchange Commission, initially reported by Business Insider.
"Given the loss of Mr. Munger, the Company does not expect the future financial performance of its marketable securities portfolio to rival its past performance," it added.
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Munger kickstarted his investment strategy with a notable risk – he plowed in $20.4 million in stocks while the journal reported $40 million in total revenues and $12 million in operating income that year.
However, the gamble quickly turned profitable, yielding $34 million in unrealized gains by September that year as stocks surged.
During his nearly 13-year term, Munger, a critic of excessive diversification, limited the Daily Journal’s stock portfolio to eight or fewer companies.
By investing in firms like Bank of America Corp. BAC, Wells Fargo & Co. WFC, and Tesla competitor BYD. BYDFF BYDDY, the publisher’s stockholdings rose to $303 million as of Sept. 30 this year, which includes $138 million in unrealized gains.
To put it in perspective, Daily Journal reported approximately $68 million in revenue and $7 million in operating income last fiscal year.
Why It Matters: With the loss of Munger, one of history’s most successful investors, Daily Journal is adjusting its shareholders’ future expectations. However, the publisher’s remarks emphasize the substantial influence Munger had on a business that’s notably less renowned than Berkshire.
Munger’s death was mourned by many, including Buffett, who praised Munger’s “inspiration, wisdom, and participation” at Berkshire Hathaway.
The veteran investor, who had no plans of retirement, was introduced to Buffett in 1959 and the duo built Berkshire Hathaway into a holding company giant with over $784 billion in market capitalization.
Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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