Charlie Munger’s Favorite Value Investor Has 83% of Hedge Fund’s Assets in These 3 Stocks

Li Lu is the founder and Chairman of Himalaya Capital, A Seattle-based hedge fund that manages $15 billion in assets, including $2.71 billion invested in eight U.S.-listed stocks.

Key Points About This Article:

• Himalaya Capital Management is a Seattle-based hedge fund founded by Li Lu in 1997. 
• It is best known for managing the late Charlie Munger’s family assets. 
• Bank of America (NYSE:BAC), Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), and Berkshire Hathaway (NYSE:BRK-B) account for 83% of the hedge fund’s $2.71 billion in assets. 
• Are you ahead, or behind on retirement? SmartAsset’s free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don’t waste another minute; get started by clicking here here.(Sponsor)

While Lu is a respected and well-known investor, it is the man’s relationship with the late Charlie Munger; Lu managed Munger’s family’s assets, and the two became close friends over the years. 

On Nov. 28, the first anniversary of Munger’s death, Lu gave his first U.S. interview in four years out of respect for his friend and client. You can read the transcript. I recommend it.  

While there are so many pearls of wisdom to take from the interview, the bits about value investing stand out.

“In 30 years of practice, I have met many investors from all over the world. I feel that value investors will always be a small minority,” Lu said. “More and more people like to use this term, but fewer people practice it. Warren himself said that value investing is like vaccination. It works for some people and not for others.”

As mentioned in the opening paragraph, Himalaya Capital owns eight U.S.-listed stocks. Three accounts for 83% of the hedge fund’s assets. One of them shouldn’t be surprising, given Lu’s fondness for Munger and Warren Buffett.

Google It Is

Although by percentage, Bank of America (NYSE:BAC) is Himalaya’s largest holding, accounting for 29.31% of the hedge fund’s 13F assets, it is Lu’s ownership of Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) that is the hedge fund’s most significant position.

Himalaya owns $579.7 million in the tech company’s GOOG Class C shares (non-voting) and another $481.4 million in GOOGL Class A shares (voting). Together, they account for 39.2% of Himalaya’s $2.71 billion in assets.

On Himalaya’s website, Lu discusses his philosophy about investing. The quote is his, as written in Charlie Munger’s book, Poor Charlie’s Almanack.

“One common problem for investors is that they tend to swing too often. This is true for both individuals and for professional investors operating under institutional imperatives, one version of which drove me out of the conventional long/short hedge fund operation,” Lu stated in the book’s third edition, published in 2009. 

“However, the opposite problem is equally harmful to long-term results: You discover a ‘fat pitch’ but are unable to swing with the full weight of your capital.”

In 2024’s fourth quarter, Lu’s firm made no changes to its eight holdings. It made two changes in the third quarter, one in the second, and no changes in the first quarter of 2024. 

The last time he changed Himalaya’s Alphabet holdings was in Q2 2022, when it acquired 47,400 shares in GOOGL stock and added 66,300 shares in GOOG to bring its Class C shareholdings to 152,200. 

Himalaya first acquired Class C shares in Q2 202o, buying 85,900. Today, it owns 3.04 million and 2.54 million Class A. 

Talk about taking a big swing for the fences. In five years, Lu significantly increased his shareholdings in the parent of Google and YouTube. His shareholders have been richly rewarded. 

There are likely more gains to come. 

Bank of America Isn’t the Only Bank Holding

As mentioned, Himalaya’s most significant position for a single stock symbol is Bank of America at 29.31%. Lu first acquired shares in one of America’s largest banks by assets in Q1 2020, purchasing 12.36 million shares. Himalaya is estimated to have paid an average price per share of $33.11. 

Today, it owns 18.08 million shares, picking up 2.23 million in Q4 2021 and 3.49 million more in Q1 2023. Not coincidentally, the purchases happened during corrections in BAC stock. 

In November 2021, its share price corrected by 10%, and in February/March 2023, its shares corrected by 23%. Himalaya took a big swing, upping its position by 24%. Since buying that last tranche, the bank’s shares have gained 59% over 24 months. 

Not a bad return. 

If you see Himalaya buying again, you’ll want to buy. Unfortunately, 13Fs come out six weeks after the quarter ends, so that you won’t be getting the best price, but at least you’ll know Munger’s money guy is bullish about its future. 

The hedge fund’s other bank investment is East West Bancorp (NASDAQ:EWBC). Himalaya owns 2.78 million shares of the regional bank, accounting for 9.29% of its assets. It first acquired shares in Q1 2023. Lu sits on an unrealized $30 per share gain on the hedge fund’s other bank stock holding. 

Of Course, Lu Owns Berkshire Hathaway

Himalaya owns nearly 900,000 Berkshire Hathaway  (NYSE:BRK-B) Class B shares. It first acquired the holding company’s stock in Q3 2021. It accounts for slightly more than 15% of the hedge fund’s assets. 

Lu founded Himalaya in 1997, so one would think, given his fondness for Munger and Buffett, that he would have bought it earlier than this. Perhaps he did, and it didn’t become a 13F holding until 2021. 

Interestingly, he’s never added to the number of shares or removed profits. WhaleWisdom’s estimated average price paid is $281.34, which means the hedge fund has generated an 87% return over 3.5 years,  a 19.7% compound annual growth rate.

I think he’ll continue to hold Berkshire Hathaway while Buffett remains alive. After that, it’s hard to know what anyone will do who owns its stock. It’s the million-dollar question. 

The post Charlie Munger’s Favorite Value Investor Has 83% of Hedge Fund’s Assets in These 3 Stocks appeared first on 24/7 Wall St..