In the face of BABA after the slump, 97-year-old Charlie Munger suddenly made a move and made a heavy bargain.

Recently, the "god of shares" Buffett's golden partner, Berkshire Hathaway vice chairman Charlie Munger's Daily Journal Corp. According to the disclosure of 13F documents, as of the end of March, Daily Journal Corp had accumulated 165320 shares in BABA through American depositary receipts (ADR), with a market capitalization of about $37.5 million (about 246 million yuan) at the latest share price.

The previous 13F file shows that Daily Journal Corp. Does not hold BABA. This means that the company built a new position in BABA in the first quarter of 2021.

It is worth mentioning that since November 2020, BABA has continuously encountered a "water reverse", and its share price has continued to plummet, with the biggest drop of 33.85% during the period, and the total market value has lost more than US $250 billion (equivalent to more than 1.6 trillion yuan).

Thus it can be seen that the opportunity for Charlie Munger to build a position is likely to be after the sharp fall of BABA, the "bottom" intention is more obvious.

The market is surprised that Charlie Munger, who has always been cautious, why bet on BABA at this time?

Charlie Munger shot "bottom-copying" BABA

The position trend of the investment bosses has always been the focus of the market.

On Monday, US time, Daily Journal, a newspaper owned by Charlie Munger, submitted form 13F to SEC, disclosing the position of US stocks until the end of the first quarter of 2021. The only change in the position was the construction of BABA.

As of the end of the first quarter of 2021, Daily Journal held five stocks and 165000 BABA shares, with a market capitalization of $37.483 million, or 19.02 per cent, according to the documents.

In addition, Daily Journal also holds Bank of America Corporation, Wells Fargo & Co, Gao. Bancorp, Posco Iron and Steel, the number of positions remain unchanged, the largest heavy stock Bank of America Corporation, accounting for nearly 50%.

As can be seen from Daily Journal's position structure, under Charlie Munger at the helm, Daily Journal's investment style is very cautious, focusing almost entirely on high dividend stocks in traditional sectors, and the market was surprised by the sudden heavy bet on BABA in the first quarter of 2021.

As we all know, before this, Buffett and Charlie Munger have been lack of interest in investing in Internet technology giants such as Amazon.Com Inc, Netflix Inc, Alphabet Inc-CL C and so on. Although Berkshire Hathaway began allocating Amazon.Com Inc shares in 2019, Berkshire's investment manager led the investment, and Amazon.Com Inc has never been on the list of heavy stocks.

Buffett once said at the shareholders' meeting that companies that like to invest in market dominance will be very valuable if technology companies can build a moat, but they will not invest in technology stocks that they do not understand. Prefer to hire investment managers to invest.

Berkshire Hathaway's latest list of heavy stocks also proves this point. By the end of the fourth quarter of 2020, Berkshire Hathaway's top 10 positions were Apple Inc, Bank of America Corporation, Coca-Cola Company, American Express Co, Verizon Communications Inc Communications, Moody's Corporation, U.S. Bancorp, BYD, Chevron Corp and Charter Communications.

So why did such a cautious Charlie Munger suddenly build a position in BABA?

After plummeting by 1.6 trillion, is BABA worth buying?

First of all, Charlie Munger Jiancang BABA's time and stock price position. In the fourth quarter of 2020, BABA's share price fell sharply, from US $319.32 to US $211.23, with the largest drop of 33.85%. During this period, the stock price fell more than 8% in a single day.

In the first quarter of 2021, when Charlie Munger built its position, BABA's share price remained low and fluctuated, falling slightly by 2.58%. The latest market capitalization lost more than $250 billion (more than 1.6 trillion yuan) from its peak, while the Nasdaq index rose 2.78%.

Corresponding to the stock price, BABA continues to encounter "adverse water". Since August 2020, BABA has successively encountered Ant Group IPO stranded, two consecutive antitrust investigations, and the number of annual active users has been overtaken by Pinduoduo, losing the position of the largest e-commerce platform.

BABA share price experienced a big correction, the above risks have been released to a certain extent, perhaps a relatively safe Jiancang range.

According to Charlie Munger's previous investment style, the high probability of allocating BABA in heavy positions is not for short-term speculation, but may be betting on the long-term development of BABA.

Although it faces heavy regulatory pressure in 2020, it has not hurt BABA's foundation. According to the financial report, BABA's revenue in the fourth quarter of 2020 was 221.084 billion yuan (the following are all RMB), up 37 percent from the same period last year; operating profit was 49 billion yuan, up 24 percent from the same period last year; and adjusted EBITDA (profit before interest, tax, depreciation and amortization) was 68.38 billion yuan, an increase of 22 percent over the same period last year, both exceeding market expectations.

Specifically, BABA's e-commerce business (Tmall, Taobao, Juhuashuo) still maintains rapid growth, with revenue in the fourth quarter growing 39% to 153.679 billion yuan compared with the same period last year, annual active buyers growing 22 million in a single quarter, and mobile MAU growing 21 million in a single quarter, breaking through the 900 million mark. Nine months after launch, the annual active buyers and MAU of Taobao special edition have both exceeded 100m, BABA is sinking at an accelerated pace, and there is a huge market for sinking.

More crucially, Aliyun, BABA's most important growth engine in the future, made a profit for the first time. In the fourth quarter of 2020, cloud computing revenue rose 50 per cent year-on-year to 16.115 billion yuan, with adjusted profit before interest, tax, depreciation and amortisation of 24 million yuan, compared with a loss of 356 million yuan in the same period in 2019.

In the past five years, Aliyun's revenue has increased nearly 30-fold. Ariyun's quarterly revenue has increased from 1 billion yuan to 10 billion yuan in four years, while it took Amazon.Com Inc six years.

BABA's senior management's attitude towards cloud computing is that cloud computing is a business with great potential, and BABA is very optimistic about the future development of cloud computing.

Overall, BABA's core e-commerce business is still growing and has not yet shown decline, while cloud computing, local life, logistics and other new businesses are developing rapidly, and some new businesses are gradually starting to make their own blood.

Munger talks about China, BABA, BYD and Jack Ma

In fact, looking back on Charlie Munger's recent public statement, it may not be difficult to understand why he suddenly bought BABA.

On December 14, 2020, Charlie Munger said in an interview that China has a real economic growth rate of 30 years, which has never been seen by any big country in the history of the world.... Some of the American companies I invest in do business in China, including Coca-Cola Company, so they have a lot of experience in understanding Chinese head companies.

At the Daily Journal shareholders' meeting on February 26th, investors asked Munger whether Ant Group and BABA were worried that the Chinese government would intervene. Is it possible for the Chinese government to nationalize BYD?

Charlie Munger believes that this kind of situation is almost impossible to happen, and some of the issues that Jack Ma talked about openly may not have been expressed so directly.

In addition, Charlie Munger said at the shareholders' meeting that the Chinese government is quite adept at economic management, and no other country in the world can lift 800 million people out of poverty in a very short period of time. China's achievements are really admirable. Today, China has rapidly joined the ranks of modern countries, and the operation and management of Chinese enterprises are becoming more and more perfect.

It can be seen that Charlie Munger's purchase of BABA may be betting on the future of the Chinese economy.

Before that, Munger had already enjoyed the huge gains from investing in China, earning Berkshire more than 20 times more than $5 billion by investing in BYD.

Munger also talked about BYD at the shareholders' meeting. He said that in the first five years of owning BYD shares, the share price remained motionless and suddenly quadrupled in 2020. He is still optimistic about the advantages that BYD has accumulated and will continue to hold when he cannot find new stocks worth buying.