Li Lu - Himalaya Capital Management
Li Lu - Himalaya Capital Management Q1 2024 Portfolio
Himalaya Capital Management , a value investing firm managed by Li Lu, disclosed 6 security holdings in their SEC 13F filing for the first quarter of 2024, with a total portfolio value of $2,260,390,000
As of Q1 2024, Li Lu’s Himalaya Capital Management portfolio showcases a focused approach with significant investments in the financial, technology, and consumer sectors. Here is a detailed overview of the top holdings:
BAC – Bank of America Corp.
- Portfolio Allocation: 30.33%
- Recent Activity: No change
- Shares Held: 18,081,133
- Reported Price: $37.92 per share
- Value at Reported Price: $685,637,000
Bank of America is the largest holding in Li Lu’s portfolio, reflecting strong confidence in the financial sector. This significant allocation suggests a belief in the bank’s ability to navigate economic cycles and generate substantial returns.
GOOG – Alphabet Inc. CL C
- Portfolio Allocation: 20.5%
- Recent Activity: No change
- Shares Held: 3,044,000
- Reported Price: $152.26 per share
- Value at Reported Price: $463,479,000
Alphabet’s Class C shares are a major part of the portfolio, indicating a strong belief in the company’s continued growth and dominance in the technology sector, particularly in digital advertising, cloud services, and artificial intelligence.
GOOGL – Alphabet Inc.
- Portfolio Allocation: 16.98%
- Recent Activity: No change
- Shares Held: 2,543,300
- Reported Price: $150.93 per share
- Value at Reported Price: $383,860,000
The holding in Alphabet’s Class A shares further emphasizes the importance of this tech giant in Li Lu’s investment strategy, showcasing confidence in its innovation and diversified revenue streams.
BRK.B – Berkshire Hathaway CL B
- Portfolio Allocation: 16.7%
- Recent Activity: No change
- Shares Held: 897,749
- Reported Price: $420.52 per share
- Value at Reported Price: $377,521,000
Berkshire Hathaway Class B shares represent a significant position, reflecting confidence in Warren Buffett’s conglomerate and its diversified portfolio of businesses and investments.
EWBC – East West Bancorp
- Portfolio Allocation: 9.72%
- Recent Activity: No change
- Shares Held: 2,776,351
- Reported Price: $79.11 per share
- Value at Reported Price: $219,637,000
East West Bancorp is a notable holding, indicating confidence in the regional banking sector and the bank’s growth potential, particularly in serving the Asian-American community.
AAPL – Apple Inc.
- Portfolio Allocation: 5.76%
- Recent Activity: No change
- Shares Held: 759,600
- Reported Price: $171.48 per share
- Value at Reported Price: $130,256,000
Apple Inc. rounds out the top holdings, showcasing belief in the company’s ongoing innovation, strong brand, and diversified product and service offerings.
Analysis of Top Holdings:
1. Bank of America Corp.: The largest position, reflecting strong belief in the financial sector’s resilience and Bank of America’s ability to generate returns through economic cycles.
2. Alphabet Inc. (GOOG & GOOGL): Significant investments in both Class C and Class A shares indicate confidence in Alphabet’s leadership in technology, particularly in digital advertising and cloud computing.
3. Berkshire Hathaway CL B: A substantial holding, highlighting trust in Warren Buffett’s investment strategy and the conglomerate’s diversified portfolio.
4. East West Bancorp: Investment in regional banking reflects optimism about the bank’s niche market and growth prospects.
5. Apple Inc.: A key position showcasing confidence in Apple’s innovation and continued dominance in consumer electronics and services.
Overall, Li Lu’s Q1 2024 portfolio demonstrates a focused investment strategy with significant allocations in financial and technology sectors, complemented by strategic positions in consumer and regional banking sectors. The portfolio reflects a balanced approach aimed at long-term growth and stability.
Li Lu - Himalaya Capital Management Q4 2023 Portfolio
Himalaya Capital Management , a value investing firm managed by Li Lu, disclosed 6 security holdings in their SEC 13F filing for the fourth quarter of 2023, with a total portfolio value of $2,059,252,000
Top Holdings:
As of 31 December, 2023, Li Lu’s Himalaya Capital Management’s  holdings were:
Li Lu’s Himalaya Capital Management has disclosed its Q4 2023 portfolio, showcasing strategic positions across various industries. The firm’s investment selections reflect a blend of steady blue-chip enterprises and dynamic technology firms.
Bank of America Corp. (BAC)
·     Represents the largest holding at 29.56%.
·     Recent Activity: Static over the quarter.
·     Shares Held: 18,081,133.
·     Reported Price: $33.67 per share.
·     Value at Reported Price: Approximately $608.8 million.
Bank of America’s dominant position in Himalaya’s portfolio underscores a significant bet on the financial sector’s stability and growth potential.
Alphabet Inc. (GOOG & GOOGL)
·     Combined allocation of 38.08%, with Class C shares at 20.83% and Class A shares at 17.25%.
·     Shares Held: 3,044,000 (GOOG) and 2,543,300 (GOOGL).
·     Reported Price: $140.93 (GOOG) and $139.69 (GOOGL) per share.
·     Value at Reported Price: Approximately $429 million (GOOG) and $355 million (GOOGL).
Himalaya’s significant investment in both classes of Alphabet’s stock indicates a strong conviction in the tech giant’s continued innovation and market leadership.
Berkshire Hathaway CL B (BRK.B)
·     Portfolio Allocation: 15.55%.
·     Shares Held: 897,749.
·     Reported Price: $356.66 per share.
·     Value at Reported Price: Approximately $320.2 million.
The sizable stake in Berkshire Hathaway reflects Himalaya’s confidence in the conglomerate’s diversified holdings and the leadership of Warren Buffett.
East West Bancorp (EWBC)
·     Portfolio Allocation: 9.7%.
·     Shares Held: 2,776,351.
·     Reported Price: $71.95 per share.
·     Value at Reported Price: Nearly $199.8 million.
East West Bancorp’s significant share in the portfolio may be attributed to its strong fundamentals and potential growth in the regional banking sector.
Apple Inc. (AAPL)
·     Portfolio Allocation: 7.1%.
·     Shares Held: 759,600.
·     Reported Price: $192.53 per share.
·     Value at Reported Price: Approximately $146.2 million.
Apple’s inclusion in the portfolio suggests a long-term perspective on the company’s innovative capabilities and market presence.
Li Lu’s Himalaya Capital Management’s Q4 2023 portfolio composition demonstrates a balanced approach, prioritizing stable financial institutions, while also capitalizing on the growth trajectory of leading tech firms. Each holding is a testament to the firm’s strategic investment thesis, balancing value creation with prudent risk management.
Analyzing Bank of America Corporation (BAC) from Li Lu's Perspective
Li Lu’s investment firm, Himalaya Capital Management, has taken a notable position in Bank of America Corporation (BAC), and a comprehensive analysis of BAC’s financials reveals several key factors that may have influenced this decision.
Stable Financial Performance
Bank of America has demonstrated consistent revenue growth over the past few years, with a 3.82% increase in 2023 over 2022. This steady performance is a hallmark of a robust business model, especially in the banking sector where consistency is a key indicator of reliability.
Solid Fundamentals and Valuation Metrics
With a market capitalization of $267.04 billion and a trailing twelve-month net income of $24.87 billion, BAC presents strong fundamentals. Its price-to-earnings (PE) ratio of 11.01 suggests that the stock is reasonably valued compared to earnings, which could indicate a potential undervaluation in the market. Furthermore, the forward PE of 10.75 points to expectations of continued earnings strength.
Dividend Yield and Growth
BAC’s dividend yield stands at 2.83%, which is attractive to investors seeking income. The dividend has shown a growth trend, which can be a sign of a company’s confidence in its future cash flow and financial health.
Analysts’ Confidence
The analysts’ buy rating and a price target that represents a 6.22% increase from the current price suggest that the market sentiment around BAC is positive. This external validation may reinforce the decision to invest.
Operational Efficiency
The operating margin of 33.21% indicates that BAC is efficient in converting its revenue into profit. This is further supported by a high free cash flow margin, which stood at 45.63% for the year.
Prudent Management of Equity and Debt
BAC’s debt-to-equity ratio is relatively stable, and the net cash/debt growth shows that the company is managing its capital structure prudently. Li Lu’s investment philosophy often emphasizes the importance of a strong balance sheet, and BAC’s financials in this area seem to align with that principle.
Return on Equity (ROE) and Assets (ROA)
The ROE of 8.70% and ROA of 0.80% are indicators of BAC’s effectiveness in generating profits from shareholders’ equity and total assets, respectively. These figures, although not exceedingly high, are indicative of a well-managed company in a mature industry.
Macro and Microeconomic Factors
Beyond the numbers, macroeconomic conditions, such as interest rate environments, can impact banks significantly. Micro factors, including management quality and competitive positioning, can also play a vital role in an investment decision.
Conclusion
Taking these factors into account, Himalaya Capital Management’s investment in Bank of America is likely driven by the bank’s solid fundamentals, reasonable valuation, stable financial performance, and efficiency in operations. Additionally, the positive analysts’ outlook and the attractive dividend yield add to BAC’s appeal as a stable investment capable of delivering consistent returns. Li Lu’s investment strategy, known for focusing on high-quality companies with potential for sustainable growth, seems to find a match in Bank of America’s profile.
Who is Li Lu ?
1966:
Born on April 6 in Tangshan, Hebei, China.
1976:
Survived the Tangshan earthquake, one of the deadliest in recorded history.
1985:
Enrolled at Nanjing University, initially majoring in Physics before transferring to Economics.
1989:
Became a leading figure in the Tiananmen Square student protests, organized students, and participated in a hunger strike. Fled to New York City after the protests were suppressed.
1990:
Published “Moving the Mountain: My Life in China,” a book about his experiences in China and the Tiananmen Square protests.
1990s:
Enrolled at Columbia University, first in the American Language Program, then in the School of General Studies, and later transferred to Columbia College.
1993:
 Inspired to pursue investment after attending a lecture by Warren Buffett at Columbia University.
1996:
Graduated from Columbia University with three degrees: a B.A. in economics, an M.B.A., and a J.D. Began a career in investment banking as a corporate finance associate at Donaldson, Lufkin & Jenrette.
1997:
Founded Himalaya Capital Management, focusing on a disciplined and value-oriented approach to investing.
2003:
Met Charlie Munger, who became an investor in his fund and a mentor. This relationship led to the transformation of his hedge fund into a long-only investment vehicle.
2004-2013:
The fund was closed to new investors and focused on global investment opportunities without charging a management fee.
2010:
Withdrew from consideration to manage a significant portion of Berkshire Hathaway’s investment portfolio post-Warren Buffett.
2020:
Elected to The American Academy of Arts and Sciences. Co-founded the Guardians of the Angeles Charitable Foundation to address the global COVID-19 crisis. Published “Civilization, Modernization, Value Investment and China.”
2021:
Co-founded The Asian American Foundation, serving as its chairman, to support Asian American and Pacific Islander communities. Himalaya Capital Management reported managing almost US$18.5 billion in capital.
Ongoing:
Serves as a trustee for both Columbia University and the California Institute of Technology (Caltech). Recognized with several awards and honors, including the John Jay Award from Columbia College, the Raoul Wallenberg Human Rights Award, and the Reebok Human Rights Award. Featured in the Smithsonian Institute’s “Many Voices, One Nation” exhibition.
Li Lu's Investing Principles
Investing is about intellectual honesty. You want to know what you know. You want to know, mostly, what you don’t know.
Part of the game of investing is to come into your own. You must find some way that perfectly fits your personality because there is some element of a zero sum game in investing.
Investing is about predicting the future, and the future is inherently unpredictable. Therefore, the only way you can do better is to assess all the facts and truly know what you know and know what you don’t know. That’s your probability edge.
The game of investing is a process of discovering who you are, what you’re interested in, what you’re good at, what you love to do, then magnifying that until you gain a sizable edge over all the other people.
Being a value investor means you look at the downside before looking at the upside.
Because in investing the more you know the better off you are.
Stocks aren’t just little pieces of paper that you buy and sell. Each one is in fact a certificate bestowing fractional ownership of a company
As far as I can observe and speak to with statistics, there has only been one style which has reliably and safely brought investors exceptional long-term returns: value investing.