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Inner Circle: 3 Stock Picks from a Money Manager That Charlie Munger Trusts

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  • Investors looking for solid picks should choose Li Lu’s stocks to buy.
  • Berkshire Hathaway (BRK-B): A man who worships Munger and Buffett would own the holding company’s stock.
  • Alphabet (GOOG, GOOGL): The cloud remains very profitable. 
  • East West Bancorp (EWBC): Its balance sheet is more robust than some larger banks. 
Li Lu stocks - Inner Circle: 3 Stock Picks from a Money Manager That Charlie Munger Trusts

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If you’re looking for Charlie Munger stocks to buy, it turns out the best place to look is a relatively unknown Chinese-American portfolio manager named Li Lu.

Over the summer, stories surfaced about the fascinating man behind Himalaya Capital. Born in China in 1966, Lu fled to New York in 1989, where he attended Columbia University, becoming fascinated with investing and finance. Lu ultimately met and impressed Munger, the Berkshire Hathaway (NYSE:BRK-B) vice-chairman and right-hand man to Warren Buffett. 

Munger invested $88 million with Lu in the early 2000s. It’s turned into more than $400 million in the decades since. 

Lu first invested in BYD (OTCMKTS:BYDDY) in 2002. He would later introduce Munger and Buffett to the Chinese automotive and battery manufacturer. It’s been one of Buffett’s best investments of the 21st century. 

According to Himalaya Capital’s latest 13F, its stock portfolio is valued at $1.8 billion, with just five companies accounting for its total investments. Let’s dive deeper into three of the top picks from Munger’s portfolio.

Berkshire Hathaway (BRK-B)

A Berkshire Hathaway (BRK.A, BRK.B) sign sits out front of an office in Lafayette, Indiana.
Source: Jonathan Weiss / Shutterstock.com

In Himalaya’s Q2 2023 13F, it says that it held nearly 900,000 Berkshire Hathaway (NYSE:BRK-B) shares at the end of June, valued at $306.1 million.

According to WhaleWisdom.com, Himalaya first bought Berkshire stock in the third quarter of 2021 for an estimated average price of $281.34. Its current share price is 32% higher than what Lu paid for Buffett’s holding company stock.

BRK.B is up nearly 20% in 2023, more than 300 basis points higher than the S&P 500.  

Today, Himalaya Capital’s website focuses on publicly traded stocks based in Asia, which means the holdings in the 13F aren’t the investments likely held on behalf of Himalaya’s investors such as Munger. According to its Form ADV for the SEC, Himalaya’s overall assets under management are $14.2 billion.  

Alphabet (GOOG, GOOGL)

Alphabet Inc. (GOOG, GOOGL) and Google logos seen displayed on a smartphone
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Of the $1.8 billion listed under Himalaya Capital’s 13F, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is easily its largest holding. Between the Class A and Class C shares, Himalaya’s $672 million stake in the owner of Google accounts for 37% of its total assets. 

Interestingly, Himalaya first entered its position in Alphabet’s Class C shares in Q2 2020, while entering into its Class A position in Q2 2022. It last added to its position in Alphabet in Q4 2022, adding 1.6 million Class A shares to its holdings. 

Of course, Alphabet isn’t exactly a unique holding. Of the 54 analysts that cover its stock, 44 rate it overweight or an outright buy. They give it a $150 target price, approximately 10% higher than its current share price.

East West Bancorp (EWBC)

Illustration of the inside of a bank. Bank stocks.
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True, Himalaya’s second-largest holding is Bank of America (NYSE:BAC), which holds a position of $518 million as of the end of June. However, East West Bancorp (NASDAQ:EWBC) is the one to watch. 

First, eight of the 12 analysts that cover the regional bank’s stock rate it as an outright buy, with an $88.18 target price. Down more than 27% over the past year, EWBC appears to be Himalaya’s only true value proposition. 

Further, consider the purpose of EWBC. It’s to provide banking services to the Chinese-American community in the U.S. and through its full banking license in China. Therefore, Lu’s investment makes complete sense. 

Of course, it doesn’t hurt that East West Bancorp is a well-run bank. It is an industry-leader with returns on average assets (1.85%) and a 21.0% return on average tangible common equity. Also, its net interest margin of 3.55% ranks high for the current operating environment. 

EWBC’s loan portfolio in Q2 grew 7% year over year (YOY) to $49.8 billion, while its deposits were up 2% YOY to $55.6 billion. Equally impressive, its adjusted pre-tax, pre-provision income increased by 21% over last year. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines


Article printed from InvestorPlace Media, https://investorplace.com/2023/09/inner-circle-3-stock-picks-from-a-money-manager-that-charlie-munger-trusts/.

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