At $400 million, Daily Journal looks mispriced. Not wildly, but enough.
Charlie Munger chaired this Los Angeles outfit until he died. The company owns buildings, a dying newspaper, and a stock portfolio that covers the whole valuation by itself. Which means you’re getting Journal Technologies — the software division — for nearly free.
Journal Tech sells case management systems to courts across the US, Canada, and Australia. Munger painted a fascinating picture of the business three years ago. It’s not as if he was often wrong.
The past decade tells a clean story. Every dollar the newspaper lost, the software replaced. Breakeven arrived in 2021. Growth slowed after 2019, but it still hums along.
The niche Journal addresses is attractive — courts aren’t exactly shopping around every quarter — but for now the pie is mostly Tyler’s. Journal only gets the crumbs, and without scale, it has yet to print serious profits. But that may come eventually.
You may run the math however you like. I’ve personally valued the legacy media business at zero even if it still throws off cash when foreclosures spike. Then stripped out the real estate and securities from enterprise value, and ended up paying three to four times revenue for Journal Tech.
Or probably less, as GAAP accounting most likely undersells the pipeline value. Daily Journal’s revenue recognition policies are conservative to a fault, courtesy of Munger’s heritage. Of course Tyler doesn’t bother with such caution.
I bought shares below $300. A small bet on the house Munger built, mostly through brilliantly timed wagers on Wells Fargo and Bank of America when everyone else was running for the exits.