Charlie Munger, famed as Warren Buffett’s right-hand man and the vice chairman of Berkshire Hathaway, discreetly constructed a $300 million stock portfolio at the relatively obscure newspaper publisher, Daily Journal Corporation. This week, the company cautioned its shareholders not to expect the same stellar returns following the legendary investor’s death in November.
In its latest annual report, the Daily Journal Corporation stated, “Although the Board will work to ensure that the portfolio remains well-managed, it’s impossible to ever replace Mr. Munger. 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.”
Munger chaired the Daily Journal Corporation for about 45 years, starting in 1977 and ending in 2022. He made the unusual move to invest the excess cash of the newspaper publisher and legal-software provider into other companies’ stocks at the height of the financial crisis.
The company took advantage of near-panic selling in the stock market in February 2009, redeploying some of its cash, originally invested in Treasury securities, to purchase the common stock of two Fortune 200 companies and certain bonds of a third, as disclosed in its annual report that year.
The initial deployment amounted to $20.4 million, a substantial bet for a company that earned only $40 million in total revenues and $12 million in operating income that year. The wager paid off handsomely, accumulating $34 million in unrealized gains by September as stocks rallied.
Daily Journal has consistently highlighted in its financial reports since then that Munger guided its investment decisions. Describing him as the “irreplaceable manager” of its portfolio, crediting his “judgment and suggestions,” and acknowledging his “important role” in monitoring the portfolio and placing additional bets.
Munger, known for viewing excessive diversification as the enemy of exceptional returns, limited Daily Journal’s stock portfolio to eight companies or fewer during his approximately 13 years overseeing it. Through investments in Bank of America, Wells Fargo, and Tesla-rival BYD, he increased the value of the publisher’s stockholdings to $303 million as of September 30 this year, including $138 million in unrealized gains. For context, Daily Journal earned about $68 million in revenue and $7 million in operating income last financial year.
One of Munger’s most significant successes at Daily Journal was likely BYD. The company cashed out $50 million of the electric-vehicle maker’s stock in late 2021, realizing a 15-fold return on a $3.3 million investment.
While it’s not surprising to see Daily Journal tempering its shareholders’ future expectations without one of the best investors in history picking its stocks, the publisher’s comments underscore the immense impact that Munger had on a business that is far smaller and less famous than Berkshire.