Well it’s an interesting point.
Outside of BRK I get ideas from dataroma top buys in the qtr or 6 monthly (Pabrai cloning) Then I research them in depth to get comfortable…
I think the problem is that the “cloners” were all cloning Munger, so by definition there’s group think without serious thought to the bigger picture.
When Charlie was asked about BABA and China risk at the Daily Journal meeting he just waived it off as inconsequential, it didn’t give me much confidence that he’d really thought about it.
As an aside Dalio clearly has a great deal of money invested in China and is thus very positive and pro China and puts that spin on things in the media without addressing the risks.
Ive subsequently read in depth about China and the CCP and should have done this first rather than just looking at the companies in isolation. Following this, yes they’re an economic miracle but I’ve concluded they don’t give a fig about shareholder rights. So rule No 1 applies and hence Buffett has avoided them IMO. Interesting Charlie said he looks at the risk differently when asked about this but did not elaborate.
FYI, Interactive Brokers charge $500 and 5 cents/per share to convert BABA ADR to BABA shares listed in Hong Kong. Delisting is not a big deal in my opinion. Certainly, price would drop significantly in short-term. But it’s the business fundamentals that count in the long term.
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<<Following this, yes they’re an economic miracle but I’ve concluded they don’t give a fig about shareholder rights. >>
You are probably right. Even Jack Ma ranks ‘shareholder number three’ when BABA went public in the US. https://quotefancy.com/quote/1305510/Jack-Ma-The-customer-is…
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Their main objective seems to be economic growth and raising living standards for all. Yes, BABA and Tencent form a key part of that strategy eg B2B and B2C, low friction communication, payment systems etc etc. However shareholder rights (esp overseas) are low on agenda and if you’re one of those you need to be mindful in terms of long term value creation and valuation discounts. There is little certainty. (Rule no 1).
VIE, US / China relations, regulations and now Russia also need to be taken into account.
I think Charlie is right the China risk is not a big deal. The issue here is SEC want to delist ADRs, but the Chinese govt clearly doesn’t want that happen. There are many Chinese mutual fund invested in these ADRs and millions of Chinese employees have stock options .
Ray Dalio on the hand is bull in China not because he is personally invested in China. He does this because his firm invest money for the Chinese govt (this is a public none-public info everybody on the street knows). Of course he really likes China. His son did summer internships in China. But he will not say anything negative at all about China. Just look at Jack Ma.
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I wonder if Li Lu still own Baba.
I saw a picture posted by a friend on a charity dinner, and Li Lu is posing a picture with Cai (ex CFO of baba).
If Li Lu sold baba, then I will want to sell too.
Shareholder right is ranked third, but Jack Ma and Cai hold controlling voting power to the partnership committee and decide on compensation. They hold the ADR shares. The CEOs and employees’s majority compensation are in stock too.
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https://www.dataroma.com/m/m_activity.php?m=HC&typ=s
Sold out 100% just before Munger started buying… I’d love to have been a fly on the wall on that discussion assuming he’s advising Munger.
Sold out 100% just before Munger started buying… I’d love to have been a fly on the wall on that discussion assuming he’s advising Munger.
It may not be accurate cuz he may have converted to HK shares —- since he seems “sold” 100% instead of partially.
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FYI, Interactive Brokers charge $500 and 5 cents/per share to convert BABA ADR to BABA shares listed in Hong Kong.
Delisting is not a big deal in my opinion. Certainly, price would drop significantly in short-term.
But it’s the business fundamentals that count in the long term.
…and whether you own them with enough reliability to benefit from those fundamentals.
So, two big hurdles to keep an eye on.
Jim
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If that was the case you’d think Munger would’ve done the same.
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According to TIKR he has 44% of his portfolio in BYD and no other Chinese stocks.
Look at Li-Lu’s BABA trade, he didn’t make money in it. It’s possible Charlie didn’t consult him on BABA.
"
Period Shares % of Portfolio Activity % Change to Portfolio Reported Price
2020 Q2 0 0 Sell 100.00% 4.77
2020 Q1 175,000 4.77 Buy 4.77 $194.48
"
These reports on Li-Lu’s holdings only include ADRs, I think? We wouldn’t know if he bought/sold/holds Alibaba’s Hong Kong shares.
He and Charlie are reportedly close. I have to think Charlie talked about the investment with him. Li-Lu’s sales may have been made with a short term reason behind them that Charlie wouldn’t have given much weight.
Doubt it, if I were Munger and had access to Li Lu you’d get his view inside and out before investing, hence the interest in “that” conversation.
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Another Li-Lu trade on PDD (a money-losing BABA competitor) lost about 50%:
Period Shares % of Portfolio Activity % Change to Portfolio Reported Price
2021 Q4 0 0 Sell 100.00% 1.53
2021 Q3 363,165 1.53 $90.67
2021 Q2 363,165 2.25 $127.02
2021 Q1 363,165 2.46 $133.88
2020 Q4 363,165 3.55 Buy 3.55 $177.67
PDD is kinda stupid investment, impo.
Only the poorest people in China use it, knowing fully well they are buying the worst quality products, and vendors hate selling on PDD
TIKR includes international holdings
TIKR includes international holdings
I could be wrong about this, but TIKR has a filing of LI LU holding BYD might because the holding triggered some Chinese regulatory threshold, so they have to file. But I don’t think Li Lu will have to file all of his Chinese holdings anywhere
I’ll go futher with my explanation but try to make it brief enough so you don’t interest.
The insurace broker I bought was initially mostly in P and C selling auto, home, and other personal lines. This business was growing at over 50% a year, sometimes 100%. The stock of this business was selling for less than net cash on hand, zero debt, and less than 10 times earnings.
I bought the stock, the stock tripled. Along come the Chinese regulators and the next think we know is that management is writing that these lines of business would run off and in the future will no longer be available. Stock came down of course and did sales and earnings
For a few quarters things are scrambled. Then…
They go into life products. This business grows at 100% a year all while the stock is selling at about cash on hand (still zero debt) and again 10 times earnings. Stock quadruples…
…and I sell (absolutely nothing but luck along with my not understanding what in hell the “regulators” might do next).
Regulators return! The life business (life insurance, annuities, etc.) is now also going to be in run-off, it is considered an evil operation by the Chinese gov’t. Sales, earnings, and stock again plummet.
Stock sells for 1/2 book…but now there are no earnings whatsoever. It is announced that the stock will be delisted…then just a short time afterwards it is announced that a private group will buy this business out…at the price of 1/2 book value (that’s basically 1/2 net cash).
You guys want to own something like this?
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