The late Charlie Munger quietly built a $300 million stock portfolio from scratch at a small newspaper publisher. It just warned of worse returns now he’s gone.

• Charlie Munger built a $300 million stock portfolio from scratch at a small newspaper publisher.

• Daily Journal Corporation warned the investor’s death will likely weigh on its future returns.

• Warren Buffett’s business partner had racked up $138 million in paper profits as of September.

Charlie Munger quietly built a $300 million stock portfolio at a little newspaper publisher, which warned its shareholders this week not to expect the same stellar returns following the legendary investor’s death in November.

“Although the Board will work to ensure that the portfolio remains well-managed, it’s impossible to ever replace Mr. Munger,” the Daily Journal Corporation said in its latest annual report. “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, best known as Warren Buffett’s right-hand man and the vice chairman of Berkshire Hathaway, chaired Daily Journal Corporation for about 45 years from 1977 to 2022. He made the unusual move to begin investing the publisher and legal-software provider’s excess cash into other companies’ stocks at the height of the financial crisis.

“In February 2009, the Company took advantage of near-panic selling in the stock market and redeployed some of its cash, which had been invested in Treasury securities and was generating only nominal interest, to purchase the common stock of two Fortune 200 companies and certain bonds of a third,” Daily Journal disclosed in its annual report that year.

The publisher initially deployed $20.4 million, a huge bet for a company that only earned $40 million in total revenues and $12 million in operating income that year. The wager quickly paid off; it racked up $34 million in unrealized gains by September as stocks rallied.

Daily Journal made sure to emphasize in its financial reports since then that Munger was guiding its investment decisions. It credited his  “judgment and suggestions” and said he played an “important role” in monitoring its portfolio and placing additional bets.

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Munger, who’s called excessive diversification the enemy of exceptional returns, limited Daily Journal’s stock portfolio to eight companies or fewer during his roughly 13 years running it. By investing in the likes of Bank of America, Wells Fargo, and Tesla-rival BYD, he grew 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 of revenue and $7 million in operating income last financial year.

The late investor’s biggest winner at Daily Journal was likely BYD. It 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.

It’s not surprising to see Daily Journal manage its shareholders’ future expectations, now that it no longer has one of the best investors in history picking its stocks. But the publisher’s comments underscore the immense impact that Munger had on a business that’s far smaller and less famous than Berkshire.

Read the original article on Business Insider