At 97, Charlie Munger Borrowed $37 Million to Go All-In on Alibaba — 2 Years Later He Called It One of the ‘Worst Mistakes’ of His Life

Even legendary investors can fall for a compelling story. Charlie Munger spent decades warning about the risks of overconfidence, but at 97, the longtime investing partner of Warren Buffett made a costly bet on Alibaba (BABA) that he would later call one of his worst mistakes.

Munger built the position through Daily Journal Corporation, the publishing and software company he led for decades. Securities filings show the company bought 165,300 Alibaba American depositary shares in the first quarter of 2021, worth about $37.5 million at the time. By the end of that year, the position had grown to roughly 602,000 shares valued at about $72 million, or approximately 28% of its U.S. stock portfolio. Daily Journal also used margin-account borrowings to finance investments.

Munger Fell for Alibaba’s Dominance in China

Alibaba looked like a bargain after its stock tumbled amid Beijing’s regulatory crackdown on Chinese technology companies. The pressure intensified after founder Jack Ma publicly criticized Chinese financial regulators in late 2020, prompting a wider government response that rattled investors.

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Munger, a longtime believer in investing in China, saw a dominant internet business trading well below its previous valuation. But the company’s position in online commerce proved less durable than he had expected.

At the Daily Journal annual meeting in February 2023, Munger, then 99, delivered his honest assessment of the investment.

“I regard Alibaba as one of the worst mistakes I ever made,” Munger said at the meeting. “In thinking about Alibaba, I got charmed with the idea of their position on the Chinese internet. I didn’t stop to realize they’re still a goddamn retailer. It’s going to be a competitive business, the internet. It’s not going to be a cakewalk for everybody.”

Munger identified a mistake in his own analysis. He had focused too heavily on Alibaba’s powerful position in China’s internet economy and not enough on the competitive nature of retail, where rivals can pressure prices and margins.

He also criticized Ma’s handling of the Chinese government, comparing the founder’s public remarks to “poking a bear in the nose with a sharp stick.”

Daily Journal Cut the Position as Losses Mounted

The investment began to unravel before Munger delivered his public verdict. In the first quarter of 2022, Daily Journal cut its Alibaba holdings by about half, selling 302,060 shares and reducing the position to 300,000 shares. 

Alibaba faced several headwinds, including continued regulatory pressure, competition from companies such as Pinduoduo (PDD), and broader economic challenges in China. Its stock decline also hurt Daily Journal’s concentrated portfolio, while margin borrowing added another layer of risk.

The episode was especially striking because Munger had long emphasized disciplined decision-making and the importance of avoiding investments that depended on overly optimistic assumptions.

Munger Called Alibaba His Worst Trade Again

In a CNBC interview with Becky Quick shortly before his death in November 2023, Munger revisited the investment and delivered an even more direct assessment.

“Well, my worst trade was buying a block for the Munger family in Alibaba, which is a pretty good company,” Munger told Quick. “I think it got overhyped. And Jack Ma […] made mistakes in dealing with the Chinese government.”

He then offered a familiar reminder that even accomplished investors make mistakes.

“Everybody has some bad ones,” Munger said. “The greatest tennis player goes out there some days to the center court and has a bad day. It happens.”

Munger died on Nov. 28, 2023, at 99, just two weeks after that interview.

His Alibaba investment remains a reminder that even decades of experience cannot eliminate the risk of getting a business wrong. The mistake was not simply buying a stock that fell. It was becoming so convinced by a company’s market position that the competitive pressures beneath it received too little attention.

On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.