Li Lu

His Philosophy And Investment Approach

Li Lu is one of the most respected Value Investors of today, known for his long-term, high-conviction investment strategy and his deep understanding of both U.S. and Chinese markets. As the founder of Himalaya Capital Management, he has built a reputation for finding undervalued, high-quality businesses with durable competitive advantages.

Often referred to as “China’s Warren Buffett,” Li Lu was also the investor who introduced Charlie Munger to BYD, one of Berkshire Hathaway’s most successful investments. His approach combines deep research, patience, and a strong emphasis on capital preservation, making him one of the most disciplined investors of his generation.

Key Principles of Li Lu’s Investment Strategy:

1. The Influence of Buffett and Munger
   Li Lu is heavily inspired by Warren Buffett and Charlie Munger. His investment philosophy follows their core principles:

   • Buying wonderful businesses at fair prices rather than mediocre businesses at cheap prices.

   • Holding investments for the long term and allowing compounding to work.

   • Focusing on business fundamentals rather than stock price fluctuations.

2. High-Conviction, Concentrated Investing
   Li Lu believes that diversification is often unnecessary if an investor has deep knowledge of a few outstanding businesses. Instead of spreading investments across many stocks, he focuses on a handful of high-quality companies that he understands deeply.

3. Finding Durable Competitive Advantages (Moats)
   He only invests in businesses that have:

   • Strong economic moats (e.g., brand strength, network effects, or market dominance).

   • High return on invested capital (ROIC).

   • A business model that can last for decades.

4. Long-Term Mindset
   Like Buffett and Munger, Li Lu’s strategy is based on patience and discipline. He prefers to hold great businesses for decades, letting compounding returns do the heavy lifting rather than frequently buying and selling stocks.

5. Understanding Businesses at a Deep Level
   One of Li Lu’s most famous quotes is:
   "Investing is about being a good learner. The best investors are those who constantly learn and refine their understanding."
   He dedicates enormous amounts of time to research, ensuring he understands a company’s business model, risks, and opportunities before making an investment.

6. Capital Preservation and Risk Management
   Li Lu follows Buffett’s rule: "Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1."

   • He only invests when he has high confidence in the long-term success of a company.

   • He avoids businesses with high financial leverage or unclear risks.

Notable Investments

• BYD (China’s Leading EV and Battery Maker):

  • Li Lu introduced Charlie Munger to BYD, which became one of Berkshire Hathaway’s most successful investments.

  • He identified BYD’s technological edge in batteries long before the market recognized its potential.

• American Express (AXP):

  • A long-term compounder with a strong brand and recurring revenue model.

• Other Investments:

  • Li Lu also focuses on technology, infrastructure, and finance, particularly companies with strong market positions and high cash flow generation.

What Makes Li Lu Unique?

• East Meets West Investment Style: Unlike many investors, Li Lu has a deep understanding of both U.S. and Chinese markets, giving him a unique edge.

• Extreme Focus and Patience: He only invests in a small number of companies he truly understands, holding them for the long run.

• Strong Influence from Buffett and Munger: His philosophy is deeply aligned with Berkshire Hathaway’s approach.

• Risk-Averse but Opportunistic: He carefully protects capital while taking bold bets when he sees exceptional opportunities.

Li Lu’s disciplined and deeply researched approach has made him one of the most respected investors in the world. His ability to identify high-quality businesses, focus on long-term growth, and balance risk and reward places him among the top Super Investors of today.

The information is provided for educational purposes only and does not constitute financial advice or recommendation and should not be considered as such. Do your own research.