Berkshire's Charlie Munger Boosts Long Position In Alibaba: Report

  • Some investors believe that Alibaba Group Holding Ltd BABA is a company that offers compelling value in the current environment, reports.
  • Vice-Chairman of Berkshire Hathaway Inc (NYSE: BRK-A) and CEO Warren Buffett's sidekick Charlie Munger doubled down on his firm's investment in Alibaba in early October.
  • Munger boosted its long position in Alibaba by over 80% during Q3 of 2021, to over 302,000 shares. The value investor's decision is exciting given Alibaba's dismal performance in 2021, the report added.
  • Alibaba's shares closed 2020 at $232.73 and traded below the $161 level on November 8. 
  • The stock reached a new low for 2021 of $139.63 on October 4 when news of Munger's buying hit the market. 
  • The shares rallied to a high of $182.09 on October 20 but ran out of upside steam after the market factored in Munger's purchase.
  • China has room for only one superstar, President Xi, who has consolidated his power and control over the country's 1.4 billion citizens, exclaimed Munger following the crackdown on Alibaba's Jack Ma in 2020 over wealth accumulation.
  • The report further quoted Charlie Munger stating, "Communists did the right thing." While he did not advocate for "all of the Chinese system" in the U.S., he "certainly would like to have the financial part of it in my own country." 
  • Munger's buying of Alibaba stock led to a sudden recovery in multiple leading Chinese stocks that had been under pressure over the past year. 
  • Over recent months, all of the leading U.S. stock market indices have scaled new all-time highs.
  • TINA led the U.S. rally, the feeling there is no alternative to stocks for investors, with historically low-interest rates, rising corporate profits, and a bullish trend.
  • Meanwhile, Chinese stocks have not tracked U.S. shares. 
  • The SPDR S&P 500 ETF SPY was over 25% higher in 2021, as of November 8, reflecting the fifty leading Chinese stocks that trade on U.S. exchanges, the iShares China Large-Cap ETF FXI, was 14.7% lower. The FXI ETF holds leading Chinese companies that trade on the U.S. stock market, including Alibaba. 
  • Alibaba is a leading stock in the FXI portfolio. Alibaba shares had declined by over 30% since the end of 2020 as of November 8. 
  • The Chinese stocks recovered after falling to a low in tandem with markets across all asset classes in March 2020.
  • President Xi's "collective wealth," tensions with the U.S. and Europe, and a slowdown in China's economy have weighed on Chinese stocks. 
  • Price Action: BABA shares traded higher by 1.38% at $162.4 in the premarket session on the last check Wednesday.
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