It is the single most controversial line item in the Daily Journal Corporation's holdings. While the rest of the portfolio is a conservative collection of American banks, the significant stake in Alibaba Group Holding (BABA) sticks out like a sore thumb. As we move through 2026, the debate continues: Was this Charlie Munger’s final mistake, or his most brilliant contrarian insight?
The position represents a massive divergence from the "buy American" ethos. Yet, the Daily Journal managers have refused to capitulate. They are holding onto the thesis that the market's fear of China has created a pricing dislocation so extreme that it ignores the fundamental economic reality of the business.
1. The Mathematics of Deep Value
The argument for holding BABA is not based on geopolitical optimism; it is based on cold, hard arithmetic. When you strip out the massive cash pile on Alibaba's balance sheet and look at the core e-commerce and cloud businesses, the stock often trades at a single-digit ex-cash P/E ratio.
This is the classic "cigar butt" investing style but applied to a tech giant. Daily Journal is betting that eventually, the weighing machine of the market will overpower the voting machine of sentiment. The risk is high, but the margin of safety—provided by the valuation—is arguably even higher.
📊 2. Risk vs. Reward: The BABA Ledger
To understand why a conservative fund would hold such a volatile asset, we have to look at the asymmetric payoff profile. Here is how the Daily Journal likely views the trade-off:
- The Bear Case (Risk):
🚫 Geopolitical sanctions delist the stock.
🚫 VIE structure is declared void.
🚫 Domestic consumption in China collapses. - The Bull Case (Reward):
✅ Valuation mean-reverts to global tech standards (potential 2x-3x upside).
✅ Cloud computing arm spins off for massive value unlock.
✅ Share buybacks aggressively reduce float at cheap prices.
3. Monitoring the Thesis
For investors, the Daily Journal's persistence with this holding is a lesson in conviction. It is easy to hold a stock when it is going up; it is excruciating to hold it when the headlines are negative for years.
Tracking the position size over time is crucial to understanding their confidence level. A review of the daily journal corp 13f q1 2025 data shows that despite the noise, the fund did not panic sell. They maintained their exposure, signaling a belief that the long-term economics of China's consumer class remain intact, regardless of short-term political winds.