Li Lu (Trades, Portfolio), founder of Himalaya Capital Management, released his first-quarter portfolio earlier this week.
The guru’s Seattle-based firm seeks long-term capital appreciation by embracing key value investment principles taught by legends like Benjamin Graham, Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio). With a concentration on Asia, especially China, it picks stocks of companies with high economic moats, great growth potential and trustworthy management. U.S. equities make up a small fraction of the portfolio.
Keeping these criteria in mind, the 13F filing for the three months ended March 31 shows he entered a new position in East West Bancorp Inc. (EWBC, Financial), added to the Bank of America Corp. (BAC, Financial) stake and curbed the Micron Technology Inc. (MU, Financial) investment.
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
East West Bancorp
Li invested in nearly 2.30 million shares of East West Bancorp (EWBC, Financial), allocating 6.25% of the equity portfolio to the stake. The stock traded for an average price of $69.02 per share during the quarter.
It is now his sixth-largest position.
The Pasadena, California-based bank holding company, which also has operations in China, has a $6.60 billion market cap; its shares were trading around $46.68 on Tuesday with a price-earnings ratio of 5.47, a price-book ratio of 1.05 and a price-sales ratio of 2.66.
The GF Value Line suggests the stock is significantly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 78 out of 100, the GF Score indicates the company is likely to have average performance going forward. While it received high ratings for profitability and growth, the financial strength and value ranks were more moderate and momentum was low.
Of the gurus invested in East West Bancorp, Li has the largest stake with 1.62% of its outstanding shares. Barrow, Hanley, Mewhinney & Strauss, Ken Fisher (Trades, Portfolio), Steven Cohen (Trades, Portfolio), the CI Select Canadian Equity Fund (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) also own the stock.
Bank of America
The investor increased his Bank of America (BAC, Financial) position by 23.95%, buying nearly 3.50 million shares. The transaction had an impact of 4.90% on the equity portfolio. Shares traded for an average price of $33.01 each during the quarter.
Li now holds a total of 18.08 million shares, which represent 25.36% of the equity portfolio and is now his largest holding. GuruFocus estimates he has lost 15.91% on the investment since establishing it in the first quarter of 2020.
The bank, which is headquartered in Charlotte, North Carolina, has a market cap of $218.20 billion; its shares were trading around $27.38 on Tuesday with a price-earnings ratio of 8.22, a price-book ratio of 0.87 and a price-sales ratio of 2.27.
According to the GF Value Line, the stock is significantly undervalued currently.
The GF Score of 74 implies the company is likely to have average performance in the future, driven by a high value rank and more moderate ratings for growth, financial strength, profitability and momentum.
With 12.96% of Bank of America’s outstanding shares, Buffett is by far its largest guru shareholder. Other top guru investors include Dodge & Cox, Fisher, Diamond Hill Capital (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Bill Nygren (Trades, Portfolio), the Smead Value Fund (Trades, Portfolio), the Parnassus Value Equity Fund (Trades, Portfolio), Charles Brandes (Trades, Portfolio), Prem Watsa (Trades, Portfolio), Chris Davis (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Munger and Jeremy Grantham (Trades, Portfolio).
Micron Technology
The largest transaction of the quarter was a 40.52% reduction of the Micron Technology (MU, Financial) stake, which had an impact of -12.06% on the equity portfolio. Li sold 4.65 million shares. During the quarter, the stock traded for an average per-share price of $58.60.
Li now holds 6.83 million shares, which occupy 20.20% of the equity portfolio. It is also now his second-largest holding. GuruFocus found he has gained an estimated 27.20% on the investment over its lifetime.
The semiconductor company based in Boise, Idaho has a $69.98 billion market cap; its shares were trading around $63.95 on Tuesday with a price-earnings ratio of 46, a price-book ratio of 1.48 and a price-sales ratio of 3.06.
Based on the GF Value Line, the stock appears to be modestly undervalued currently.
The GF Score of 77 means the company’s future performance is likely to be average. This is on the back of high ratings for financial strength, profitability, growth and momentum. The value rank, however, was low.
Primecap is the company’s largest guru shareholder with a 3.56% stake. Micron is also being held by Ruane Cunniff (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Watsa, Andreas Halvorsen (Trades, Portfolio), Hotchkis & Wiley, Parnassus, Mohnish Pabrai (Trades, Portfolio), Daniel Loeb (Trades, Portfolio), Grantham and Brandes, among others.
Portfolio composition
Li did not make any other changes to his holdings during the quarter.
Himalaya’s $2.04 billion equity portfolio, which is composed of seven stocks, is most heavily invested in the financial services and communication services sectors, followed by a smaller exposure to the tech space.
The guru’s other holdings as of March 31 are Alphabet Inc. (GOOG, Financial)(GOOGL, Financial), Berkshire Hathaway Inc. (BRK.B, Financial) and Apple Inc. (AAPL, Financial).
