Daily Journal's Q3 2025 Earnings: Can a Tech Pivot and Concentrated Portfolio Sustain Shareholder Value?

Daily Journal Corporation (DJCO) has long been a study in contrasts: a traditional newspaper company with a Silicon Valley-style investment portfolio, and a governance structure that defies conventional norms. Its Q3 2025 earnings report, released on June 30, 2025, offers a mixed bag of results. Revenue hit $23.4 million, driven by $7.96 million in licensing and maintenance fees and $6.53 million in consulting services. Net income soared to $14.4 million, or $10.47 per share, fueled by $11.5 million in unrealized gains on marketable securities. Yet beneath these numbers lies a deeper question: Can Daily Journal's post-Munger strategy—relying on concentrated stock bets and a nascent software business—deliver sustainable value for shareholders?

The Earnings Story: Strong Numbers, But at What Cost?

Daily Journal's Q3 performance was stellar by traditional metrics. Revenues grew 34% year-over-year, with consulting fees surging 90% to $6.53 million. The company's operating income of $3.22 million and net income of $14.4 million highlight its ability to leverage low-cost operations and high-margin investments. However, these results are inextricably tied to its $303 million marketable securities portfolio, which contributed $11.5 million in unrealized gains. This portfolio, now concentrated in just four stocks—Wells Fargo (48.1%), Bank of America (40.2%), Alibaba (9.4%), and U.S. Bancorp (2.3%)—is leveraged with a $75 million margin loan at 6% interest. A 10% drop in portfolio value could trigger a margin call, forcing asset sales at a discount.

The Post-Munger Conundrum: Governance Gaps and Strategic Uncertainty

Charlie Munger's death in 2023 and Gerald Salzman's passing in 2025 have left Daily Journal with a board of three members—Mary Conlin, John Frank, and Steven Myhill-Jones—none of whom hold significant ownership stakes. Conlin's $33,400 position pales against the $59.3 million stake Munger's family once held. This lack of alignment raises concerns about long-term value creation, particularly as the board manages a leveraged portfolio and a software division in its early stages.

Journal Technologies, the company's judicial software arm, reported $7.5 million in licensing and maintenance fees and $2.66 million in consulting revenue in Q2 2025. While these figures are encouraging, the division faces steep competition from firms like Tyler Technologies and high R&D costs. Myhill-Jones, the CEO, has emphasized modernizing court systems, but his leadership lacks the institutional memory of Munger or Salzman. The board's vague promise to “harvest” the portfolio to fund Journal Technologies remains unactionable without clear timelines or metrics.

The Risks of Concentration and Leverage

Daily Journal's portfolio strategy is a double-edged sword. Munger's concentrated bets historically outperformed diversified portfolios, but the current mix of financial and tech stocks is vulnerable to sector-specific risks. Wells Fargo and Bank of America, for instance, face pressure in a high-interest-rate environment, while Alibaba's regulatory challenges in China persist. The $75 million margin loan amplifies these risks: A 10% portfolio decline would require $7.5 million in liquidity, potentially forcing sales at inopportune times.

The Path Forward: Can Daily Journal Adapt?

For Daily Journal to thrive in the post-Munger era, it must address three critical issues:
1. Portfolio Diversification: Reducing concentration in four stocks and the margin loan would mitigate downside risk.
2. Governance Reform: Increasing board ownership stakes and aligning executive compensation with long-term performance (e.g., stock options instead of certificates) could improve accountability.
3. Software Clarity: Journal Technologies needs a clear roadmap, including R&D budgets, client retention rates, and revenue growth targets.

The board's proposed 2025 shareholder vote on an equity compensation plan—seeded by Munger's 2022 donation of 3,720 shares—is a step in the right direction, but the limited share pool (3,720 total) may struggle to attract top talent. Investors should monitor 13F filings for further portfolio changes and track Journal Technologies' metrics, such as client acquisition costs and gross margins.

Investment Implications

Daily Journal's Q3 results are impressive, but they mask structural vulnerabilities. The company's reliance on unrealized gains and a leveraged portfolio makes it a high-risk, high-reward proposition. For investors with a long-term horizon and a tolerance for volatility, the stock could offer upside if the board navigates the transition successfully. However, those seeking stability or clear governance should proceed with caution.

In the end, Daily Journal's future hinges on whether it can replicate Munger's magic in a post-Munger world—or if it will become a cautionary tale of hubris and misalignment. For now, the numbers are bright, but the path to sustainable value remains uncertain.