Munger's Only Chinese Disciple
In Charlie Munger's decades-long investing career, he almost never trusted others to manage his money. But there was one exception — Li Lu. In 2004, Munger entrusted part of his family fortune to Li Lu's management. This was the only time Munger gave money to an external fund manager.
Li Lu graduated from Columbia Business School's MBA program and founded Himalaya Capital in 1997. His most famous investment case is BYD — which not only transformed his career but also changed Munger's view of the Chinese market.
The Legendary BYD Investment
In 2003, Li Lu visited a BYD factory in Shenzhen and was deeply impressed by Wang Chuanfu's engineering talent and work ethic. He recommended BYD to Munger, who in turn convinced Berkshire to invest.
"BYD's Wang Chuanfu is a combination of Thomas Edison and Jack Welch — something like Edison in solving technical problems, and something like Welch in getting things done."
| Year | Event | BYD Stock Price |
|---|---|---|
| 2003 | Li Lu first visits BYD | ~HK$10 |
| 2008 | Berkshire invests $230M for 10% | HK$8 |
| 2021 | BYD becomes world's top EV maker | HK$300+ |
| 2024 | Berkshire position worth $6B+ | HK$230 |
From $230 million to over $6 billion — Berkshire's BYD investment generated a return of over 25x. This single case validated that value investing works in China.
Li Lu's Investment Framework
💡 Li Lu's Core Principles
- Value investing is universal — it works in every market, including China
- Understand the business deeply — visit factories, talk to management, study the industry
- Concentrated positions — when you find a great opportunity, bet big
- Long-term holding — let compounding work; BYD was held for 20+ years
- Management quality — the entrepreneur's character matters as much as the business model
Can Value Investing Work in China?
Many people doubt whether value investing is applicable in China, citing market manipulation, retail speculation, and policy uncertainty. Li Lu's answer: these concerns create opportunities, not obstacles.
"The Chinese market's inefficiency is a value investor's best friend. When 80% of trading volume comes from retail investors driven by emotion, the opportunities for rational analysis are immense."
💡 China-Specific Value Investing Insights
- Policy is a variable, not a barrier — understand government priorities and position accordingly
- Consumer upgrade is a multi-decade trend — China's middle class is still growing
- Technology catch-up creates opportunities — companies like BYD, CATL are world-class
- High retail participation = more mispricings = more opportunities for patient investors
- The A-share market is gradually becoming more institutional and efficient
💡 Li Lu — Key Summary
- Munger's only external fund manager — an extraordinary endorsement
- BYD investment: $230M → $6B+ over 15 years (25x return)
- Value investing works in China — market inefficiency creates opportunity
- Deep research + concentrated positions + long-term holding = Li Lu's formula
- Management quality is paramount — Li Lu evaluates entrepreneurs like partners
- The Chinese market's 'flaws' (retail-driven, emotional) are a feature, not a bug