In the early 2000s, Berkshire Hathaway Inc. Vice Chairman Charlie Munger made a daring yet calculated financial move. He entrusted a significant portion of his family’s fortune — $88 million — to Li Lu, often referred to as the Chinese Warren Buffett.
This bold investment, though carrying its share of risk, not only remained secure but also experienced substantial growth. It is now estimated at approximately $400 million.
“We made unholy good returns for a long, long time,” Munger said. “That $88 million has become four or five times that.”
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Their first encounter took place at a mutual friend’s residence in Los Angeles shortly after Li’s college graduation. Munger initially came across as somewhat reserved, absorbed in his thoughts rather than fully immersed in conversation. Despite this initial impression, their discourse was imbued with Munger’s concise yet profoundly insightful words of wisdom.
It wasn’t until seven years later, during a Thanksgiving lunch in 2003, that Munger and Li engaged in what Li described as a “long heart-to-heart conversation.” Impressed by Li’s prowess in the realm of investments, Munger backed him with personal funds when Li embarked on a new fund venture in 2004.
Li’s investment track record boasts notable achievements, including Kweichow Moutai, a liquor brand that has surged in value over the past two decades and ranks among China’s largest listed companies. It’s even been named China’s national liquor.
Despite being amid the pandemic, Kweichow Moutai had a fantastic year. In 2020, its stock on the Shanghai Stock Exchange rose by about 70%. The company, which is partly owned by the government and partly publicly traded, is China’s most valuable business outside of the tech sector. It’s worth more than the country’s four largest banks.
Munger commended Li’s astute decision-making, noting, “It was real cheap, four to five times earnings, and Li Lu just backed up the truck, bought all he could and made a killing.”
The investment strategy Li employed hinges on his knack for identifying undervalued prospects. This approach underscores that sometimes, it is the less conventional investments that harbor the greatest potential for substantial growth. Li’s ability to recognize opportunities when companies are undervalued has allowed him to unlock exceptional value over time.
Li’s most renowned investment is in BYD Co. Ltd., a manufacturer of batteries and electric vehicles. Li initially invested in BYD in 2002, a move that laid the groundwork for both Buffett and Munger to follow suit six years later.
Munger, acknowledging the extraordinary success, described the early investment in BYD as a “miracle.” In a CNBC interview, he said that BYD has outpaced Tesla Inc. in China, a statement that contrasts with Buffett’s views on the electric vehicle industry. Buffett has expressed concerns about excessive competition.
While Munger placed immense trust in Li, considering him the sole outsider he has ever entrusted with his finances, he also predicted that Li would eventually assume a significant role at Berkshire Hathaway.
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