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Li Lu, born in China in 1966, is a renowned investor and the founder and chairman of Himalaya Capital Management. His remarkable journey from a student leader during the Tiananmen Square protests to becoming one of the most respected figures in value investing is a testament to his resilience, intellect, and dedication. Li Lu is often referred to as “China’s Warren Buffett” and is closely associated with legendary investors Warren Buffett and Charlie Munger.
Li Lu was born and raised in Tangshan, China, where he experienced the devastating 1976 Tangshan earthquake at the age of ten. This event had a profound impact on his early life. In 1985, he enrolled at Nanjing University to study physics but later switched to economics. Li Lu became actively involved in the pro-democracy movement, eventually becoming one of the student leaders during the 1989 Tiananmen Square protests.
After the government’s crackdown on the protests, Li Lu fled China and sought asylum in the United States. He enrolled at Columbia University in New York City, where he achieved the rare feat of earning three degrees simultaneously: a B.A. in Economics, a J.D. from Columbia Law School, and an M.B.A. from Columbia Business School by 1996.
While at Columbia, Li Lu was introduced to the principles of value investing, particularly through the teachings of Benjamin Graham and lectures by renowned professor Bruce Greenwald. The value investing philosophy resonated with him, laying the foundation for his future career in finance. Li Lu was deeply influenced by Graham’s classic book “The Intelligent Investor” and Warren Buffett’s investment letters.
After completing his studies, Li Lu began his career on Wall Street, initially working at Donaldson, Lufkin & Jenrette and later at Rothschild. In 1997, he founded Himalaya Capital Management, focusing on value-oriented investments, particularly in Asia and the United States. His early investments demonstrated his ability to identify undervalued companies with significant growth potential.
One of Li Lu’s remarkable early successes was his investment in technology and internet companies during the late 1990s. However, unlike many others, he avoided the pitfalls of the dot-com bubble by adhering to strict value investing principles. His disciplined approach allowed him to generate impressive returns while minimizing risks.
Li Lu’s investment acumen caught the attention of Charlie Munger, Vice Chairman of Berkshire Hathaway. Munger was so impressed with Li Lu’s track record and investment philosophy that he not only invested his personal funds with Himalaya Capital but also became a mentor and close associate. In a 2010 interview, Munger praised Li Lu, stating, “Li Lu is a genius, and we’ve made a lot of money together.”
Munger has often mentioned Li Lu as a potential successor to manage Berkshire Hathaway’s investment portfolio, highlighting the depth of their professional relationship and mutual respect.
One of the most significant contributions Li Lu made was introducing Charlie Munger and Warren Buffett to BYD Company Limited, a Chinese manufacturer of automobiles and rechargeable batteries. Recognizing BYD’s potential in the burgeoning electric vehicle market, Li Lu invested in the company and shared his insights with Munger.
In 2008, based on Li Lu’s recommendation, Berkshire Hathaway purchased a 10% stake in BYD for $230 million through its subsidiary, MidAmerican Energy Holdings. This investment has been highly successful, with BYD becoming a global leader in electric vehicles and battery technology. The stake’s value has increased dramatically, showcasing Li Lu’s foresight and deep understanding of industry trends.
Li Lu’s investment philosophy is deeply rooted in the principles of value investing. He seeks to identify companies with strong fundamentals, durable competitive advantages (or “moats”), competent and honest management teams, and long-term growth prospects. His approach emphasizes buying these companies at prices significantly below their intrinsic value, providing a margin of safety.
Key aspects of Li Lu’s investment approach include:
Beyond his investment activities, Li Lu is committed to philanthropy and education. He established the Li Lu Humanitarian Foundation, which supports initiatives in human rights, education, and disaster relief. Li Lu is also a founding member of the Asian American Foundation, which aims to address challenges faced by Asian Americans and Pacific Islanders in the United States.
He frequently speaks at universities and investment conferences, sharing his insights on investing, value philosophy, and the importance of ethics in business. Li Lu emphasizes the role of integrity, patience, and continuous learning in achieving long-term success.
Li Lu is the author of the book “Moving the Mountain: My Life in China“, published in 1990, which chronicles his experiences during the Tiananmen Square protests and his journey to the United States. The book offers a unique perspective on China’s political landscape during a critical period in its history.
His thoughts on investing have been featured in various publications and interviews. Li Lu is known for his articulate explanations of complex investment concepts and his ability to distill wisdom from multiple disciplines, much like his mentor Charlie Munger.
Li Lu’s journey from a student leader in China to a highly respected investor and philanthropist in the United States is an inspiring story of resilience and achievement. His success underscores the universal applicability of value investing principles across different markets and cultures.
By combining rigorous analysis with a deep understanding of businesses and industries, Li Lu has built a remarkable track record at Himalaya Capital Management. His influence extends beyond his investment returns; he serves as a bridge between Eastern and Western investment philosophies and business practices.
Investors can learn several valuable lessons from Li Lu’s approach:
Li Lu’s remarkable journey and investment success demonstrate the power of disciplined value investing and the importance of integrity and perseverance. His story is not only inspirational but also offers practical guidance for investors seeking to navigate the complexities of global markets.
By studying Li Lu’s investment philosophy and applying his principles, investors can enhance their decision-making processes and strive for long-term success in their own portfolios.
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