Li Lu (Trades, Portfolio)’s Himalaya Capital Management only made buy for its U.S. portfolio in the second quarter of 2022 - well, two, if you consider that the firm was buying both Class A and Class C shares of Alphabet Inc. (GOOG, Financial)(GOOGL, Financial). According to the firm’s 13F report for the period, which details the U.S. common stocks owned at the end of June, Himalaya owned six U.S. stocks in total.
Now, I say U.S. stocks because 13F reports only show U.S. common stock holdings as of the quarter's end. They do not detail international equities positions or other assets (such as cash and credit). That’s why Himalaya’s 13F filing only shows six holdings with a combined value of $1.9 billion.
Figures and estimates vary, but it has been reported that the hedge fund manages around $30 billion, most of which is invested in China and across Asia. As such, these positions would not show up on the SEC filings.
The fund manager also cut his teeth investing in smaller Asian businesses, start-ups and private equity-like opportunities. He could have a significant percentage of Himalaya’s assets invested in these opportunities. Once again, these will not be reported on the 13F filing as there is no disclosure requirement. The fund does not communicate these positions, and the fund manager rarely gives anything away in the interviews in which he talks about holdings, so there is really no way of knowing what else Himalaya owns. Still, we do get some insight into the firm's U.S. stocks from the quarterly SEC reports.
At the end of the quarter, the largest holding in Himalaya's U.S. equity portfolio was the semiconductor manufacturer Micron Technology (MU, Financial), accounting for 33.4% of the U.S. equity portfolio. The hedge fund has owned a position in the stock since the fourth quarter of 2019, when it was the only position in the U.S. equity portfolio.
The second largest holding, accounting for around a quarter of assets in the portfolio, was Bank of America (BAC, Financial). This has been a significant position for the hedge fund since the first quarter of 2020.
The third largest holding and one the fund manager increased by 78% in the three months to the end of June was the Class C non-voting shares of the parent company of search engine Google, Alphabet (GOOG, Financial).
Li first bought this position in the second quarter of 2020 at an average price of around $71 per share. He hasn’t made any other changes to the holding since then, watching the share price more than double before coming back down in the recent market correction. It appears that the second-quarter prices were enough incentive to add more shares.
That would make sense. If he bought the stock at a substantial margin of safety in the second quarter of 2020, and the stock has traded down close to the initial acquisition price two years later, even though the business has continued to build value, it implies an even greater discount now.
The fund manager also acquired just under one million shares of the Class A voting stock of Alphabet (GOOGL, Financial), a new position.
Li knows a lot about investing (he was once tapped to potentially take over from Warren Buffett (Trades, Portfolio) as CEO of Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial)), and he also knows a lot about investing in the tech sector, specifically smaller technology businesses. Thus, I trust his judgement on Alphabet here.
