Daily Journal Corporation publishes several newspapers and publications with a specific focus on topics of interest to the legal and real estate professions and also provides specialized information technologies to courts and other justice agencies. Although Daily Journal’s main lines of business have produced interesting results over the last several years due to dislocations in the real estate markets of California and Arizona, many investors have instead focused on the company’s growing and highly concentrated investment portfolio managed by Daily Journal Chairman Charlie Munger.
In late 2011, we observed that Daily Journal was evolving into a “hedge fund” but the securities within the portfolio have been unknown until recently because the company only provided very high level disclosures without a listing of specific securities. On February 10, Daily Journal filed its first 13-F report with the SEC which lists the company’s holdings in equity securities traded on exchanges in the United States. The report reveals that Daily Journal owns shares of Bank of America, Posco ADRs, US Bancorp, and Wells Fargo. The exhibit below shows the positions listed on the 13-F along with a placeholder for securities that remain undisclosed based on the company’s recent disclosure that the securities portfolio was worth a total of $150,747,000 as of December 31, 2013.
Daily Journal states that the securities “consist of common stocks of three Fortune 200 companies, two foreign companies and certain bonds of a sixth”. Based on the 13-F filing, we now know that the three Fortune 200 companies are Bank of America, US Bancorp, and Wells Fargo and that one of the foreign companies is Posco which is held in the form of ADRs traded on a United States stock exchange. As we noted in 2011, Mr. Munger has long been known as an enthusiastic supporter of BYD. The Munger family owns shares of BYD and Mr. Munger was the driving force behind Berkshire Hathaway’s investment in the company. It seems plausible that the second foreign company is BYD and that it is not listed in the 13-F because the shares are held on a foreign exchange.
Most investors are familiar with Mr. Munger’s role as Vice Chairman of Berkshire Hathaway and he has clearly played an important role at Berkshire when it comes to security selection and purchase of wholly owned subsidiaries. However, Berkshire’s portfolio is most closely associated with Warren Buffett and it is difficult to know exactly which decisions at Berkshire are driven by Mr. Munger.
At Daily Journal, which is unaffiliated with Berkshire Hathaway, investors can gain insight into companies that clearly represent Mr. Munger’s highest conviction ideas. The results of his activities at Daily Journal have been spectacular: Over the past five years, the securities portfolio has evolved from holding only cash and treasury bills to over $150 million invested primarily in a concentrated equity portfolio with over $102 million in unrealized gains. The securities portfolio, rather than Daily Journal’s operating business, now represents the majority of intrinsic value and the company’s share price has reflected this success.
Although Daily Journal most likely began filing 13-F reports with the SEC grudgingly, value investors now benefit by having another “superinvestor” to follow on a quarterly basis.
Disclosure: No position in Daily Journal