How Charlie Munger's Disciple Li Lu Invests

Li Lu's Early Life and Education

• 💡 Born in China in 1966 amidst the Cultural Revolution, Li Lu experienced social chaos and was separated from his parents.
• 📌 As a a student leader, he participated in the Tiananmen Square protests in 1989, leading him to flee to France and then the United States in 1990.
• 🎓 He achieved an extraordinary academic feat at Columbia University, completing three distinct degrees in six years while simultaneously learning English.
• 📚 During his studies, he developed a strong interest in value investing, attending classes taught by legendary investor Bruce Greenwald.

Founding Himalaya Capital Management

• 🚀 In 1997, Li Lu founded Himalaya Capital Management with limited capital, inspired by Benjamin Graham, Warren Buffett, and Charlie Munger.
• 🎯 His investment philosophy focused on long-term value investing, seeking solid, undervalued companies with strong competitive advantages and ethical management.
• 🌍 Initially, he concentrated on emerging markets, particularly Chinese companies, before expanding to US and other international markets.
• 📈 The fund has reportedly achieved average annual returns exceeding 20%, managing approximately $15 billion in assets by 2025.

The Charlie Munger Connection

• 🤝 Charlie Munger was highly impressed by Li Lu's discipline and character, leading him to invest his personal wealth in Himalaya Capital.
• 🔑 Munger trusted Li Lu's judgment so much that he recommended BYD to Warren Buffett, resulting in Berkshire Hathaway's highly profitable investment.
• 💬 Munger even suggested Li Lu could be a potential successor to Buffett at Berkshire Hathaway, a significant endorsement.

Li Lu's Investment Methodology

• 🧠 Li Lu, often called "Mini Munger," emphasizes competent and incentivized management, strong competitive advantages, and low company debt.
• ✅ He maintains a low portfolio turnover and a highly concentrated portfolio, investing for the long term in companies he deeply trusts.
• 📊 Key metrics include a Return on Invested Capital (ROIC) of at least 15%, high gross margins, and predictable, growing cash flows.
• 🔍 For valuation, he assesses business units separately, uses conservative EBITDA calculations (net debt max 2x EBITDA), and is open to higher multiples for justified growth and strong management.

Notable Investments and Current Portfolio

• 🚗 His most famous investment is BYD, a Chinese electric vehicle manufacturer, which he discovered in 2002 and recommended to Munger and Buffett.
• 💰 Berkshire Hathaway's 2008 investment of $230 million in BYD grew to $8 billion, demonstrating the immense success of Li Lu's early insight.
• 🏦 As of 2025, Himalaya Capital's highly concentrated portfolio includes significant positions in US banks (Bank of America, East West Bancorp), Alphabet, Apple, and Berkshire Hathaway, with a smaller allocation to energy companies.
• 🔄 The fund has shown few recent movements, reflecting Li Lu's long-term investment approach, though some positions like Apple, Bank of America, and Alphabet were slightly reduced.