The Masterclass of Li Lu
A deep-dive tutorial into the philosophy, portfolio architecture, and multi-decade compounding machine built by one of the greatest contemporary value investors.
The Crucible of Character
To comprehend the psychological fortitude required for extreme portfolio concentration, one must examine the profound personal trials that forged Li Lu's resilience.
Born in 1966 in Tangshan, China, his early life coincided exactly with the onset of the Cultural Revolution. Because his parents were educated professionals, they were targeted and sent to labor camps. Li Lu was subsequently shuffled between various foster families and state orphanages, learning severe self-reliance at an extraordinarily young age.
At age ten, he survived the catastrophic 1976 Tangshan earthquake. While the disaster claimed over 240,000 lives—including members of his adoptive family—he miraculously survived. Despite these compounding tragedies, his grandmother instilled in him a profound reverence for education, eventually propelling him to Nanjing University to study physics and later economics.
In 1989, driven by a desire for democratic reform, he became a preeminent student leader during the Tiananmen Square protests, notably helping organize the student hunger strikes. Following the violent suppression, he was placed on the Chinese government's "21 Most Wanted" list. He orchestrated a harrowing escape through the underground network known as "Operation Yellowbird," fleeing to Hong Kong, then Paris, and finally arriving in New York City as a political refugee speaking practically no English.
The Buffett Epiphany (1993)
The pivotal turning point occurred while he was burdened with student debt. A friend invited him to a guest lecture at Columbia University delivered by Warren Buffett. Listening to Buffett's rational, moral, and compounding-focused approach to capitalism completely rewired Li Lu's worldview. It provided a predictable framework in a chaotic world, inspiring him to invest his meager savings and launching his legendary career.
The Columbia Marathon
Assimilating into the U.S. and driven by an intense work ethic forged in his youth, Li Lu displayed unprecedented academic endurance at Columbia University. Over a six-year period, he achieved what few ever have, becoming one of the first students in the university's history to graduate simultaneously in 1996 with three rigorous degrees:
- B.A. in Economics (Columbia College)
- Juris Doctor (Columbia Law School)
- M.B.A. (Columbia Business School)
Epistemology of Capital Allocation
A synthesis of Benjamin Graham's foundational valuation principles, Charlie Munger's qualitative refinements, and a profound comprehension of Asian macroeconomic dynamics.
The Ownership Mindset
A stock is not a tradable piece of paper subject to momentum, but a fractional ownership stake in an underlying commercial enterprise.
Mr. Market
The secondary market exists exclusively to serve the investor by offering continuous prices, not to command the investor's assessment of intrinsic value.
Margin of Safety
Acquire assets substantially below conservatively calculated intrinsic value to absorb forecasting errors, management missteps, and macroeconomic shocks.
Circle of Competence
Making money in capital markets correlates with the absolute accuracy of knowledge contained exclusively within strictly defined boundaries of understanding.
The Investigative Imperative
Li Lu approaches equity research not merely as a financial analyst, but as an investigative journalist and prospective business owner. He famously insists that before investing, an individual must know the business fundamentally better than its own management team.
This methodology demands discarding superficial Wall Street models in favor of granular, absolute understanding: physically verifying supply chains, interviewing former employees, analyzing competitor vulnerabilities, and relentlessly tracking a decade of historic capital allocation records. If a business or its leadership falls outside his strict "Circle of Competence," it is immediately passed over.
He views risk not as price volatility—which he actively welcomes to lower his entry basis—but solely as the mathematical probability of a permanent loss of capital.
Value Investing as a Moral Calling
Unlike quantitative algorithms or high-frequency trading, Li Lu views true value investing as a strictly positive-sum game. By identifying undervalued, productive assets and avoiding toxic ones, value investors perform a vital public service: efficiently directing society's capital to its highest and best use, thereby growing the real economy.
He deeply internalized Munger's concept of the "lollapalooza effect," actively seeking out businesses where multiple mental models and structural advantages compound simultaneously and exponentially.
In his view, extreme patience is a fiduciary requirement. If an investor can identify just a handful of these "inevitable compounders" over a 40-year career, immense wealth generation is a mathematical certainty without the need for excessive, friction-heavy trading.
The Munger Connection
The operational success and credibility of Himalaya Capital is inextricably linked to the mentorship of Charlie Munger. In 2004, Munger allocated $88 million of his family's personal fortune to Li Lu—a stake that subsequently ballooned to roughly $400 million. Munger famously described Li Lu as "the Chinese Warren Buffett" and noted he was the only outside manager he ever trusted with his family's capital.
This partnership yielded one of Berkshire Hathaway's most spectacular non-traditional investments: the 2008 acquisition of BYD (Build Your Dreams). Pitched by Li Lu, Berkshire invested $232 million for a 10% stake in the obscure Chinese battery maker. As BYD transformed into the world's largest Electric Vehicle manufacturer, surpassing Tesla in production, the stake appreciated more than thirtyfold, generating billions in pure profit.
Q4 2025 Form 13F Architecture
Himalaya Capital executes its mandate through an unyielding commitment to extreme portfolio concentration, managing an estimated $14-$17 billion globally, with a hyper-curated U.S. subset.
| Company | Ticker | Shares | Weight | Value (USD) | Q4 Activity |
|---|---|---|---|---|---|
| Alphabet Inc - Class A | GOOGL | 2,543,300 | 22.31% | $796,052,900 | No Change |
| Alphabet Inc - Class C | GOOG | 2,451,300 | 21.55% | $769,217,940 | No Change |
| Bank of America Corp | BAC | 10,431,387 | 16.08% | $573,726,285 | No Change |
| Pinduoduo Inc - ADR | PDD | 4,608,000 | 14.64% | $522,501,120 | No Change |
| Berkshire Hathaway Inc Cl-B | BRK.B | 897,749 | 12.64% | $451,253,535 | No Change |
| East West Bancorp Inc | EWBC | 2,776,351 | 8.74% | $312,034,089 | No Change |
| Occidental Petroleum Corp | OXY | 1,466,500 | 1.69% | $60,302,480 | No Change |
| Crocs Inc | CROX | 628,159 | 1.51% | $53,720,158 | New Buy |
| Apple Inc | AAPL | 110,600 | 0.84% | $30,067,716 | No Change |
Tech & Finance Monopolies
The portfolio is massively anchored by Alphabet (43.86%) and Bank of America (16.08%). Alphabet operates as a digital toll bridge across global information, positioning it beautifully for the AI computational epoch. BAC provides resilient, steady returns amid shifting cycles.
The PDD Thesis (14.64%)
A contrarian, massive bet on Pinduoduo/Temu. While Western capital fears regulatory opacity, Li Lu isolated PDD as a superior structural compounder capable of high-velocity revenue generation and delivering extreme value to price-sensitive demographics globally.
The Architecture of Replicability
Systemic Hazards of 'Coattailing'. Why retail investors attempting to clone Li Lu's 13F frequently suffer severe losses.
Informational Latency
Institutional managers have a 45-day grace period to file 13Fs. When the public discovers a trade, it may have been executed up to four months prior. The mimicking investor acts on decayed intelligence.
Incomplete Mosaic
The 13F isolates only US-listed equities (approx. 20-25% of his AUM). Observers miss massive non-US deployments, like the multi-billion dollar stakes in mainland Chinese financials (e.g., PSBC on the HKEX), leading to distorted risk exposures.
Psychological Asymmetry
Himalaya Capital weathers 50-80% drawdowns over decades. A retail investor borrowing a ticker symbol cannot borrow the manager's deep-seated conviction, inevitably capitulating at the precise moment of maximum pessimism.