Summary
- Guru increased his bets on Facebook’s parent company and Bank of America
BAC .
- He sold out of Pinduoduo
PDD .
Li Lu (Trades, Portfolio), founder of Himalaya Capital Management, released his fourth-quarter portfolio earlier this month.
The guru’s Seattle-based firm seeks long-term capital appreciation by embracing key value investment principles taught by legends like Benjamin Graham, Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio). With a concentration on Asia, especially China, it picks stocks of companies with high economic moats, great growth potential and trustworthy management. U.S. equities make up a small fraction of the portfolio.
Keeping these criteria in mind, the investor boosted his holdings of Meta Platforms Inc. (FB, Financial) and Bank of America Corp. (BAC, Financial) and exited its Pinduoduo Inc. (PDD, Financial) position during the three months ended Dec. 31.
Meta Platforms
Li upped his Meta Platforms (FB, Financial) position by 53.02%, buying 303,600 shares. The trade had an impact of 3.83% on the equity portfolio. During the quarter, the stock changed hands for an average price of $332.02 per share.
He now holds 876,200 shares total, accounting for 11.06% of the equity portfolio. As his third-largest holding, GuruFocus says Li has lost an estimated 6.98% on the investment, which was established in the second quarter of 2020.
Li’s holding history of Meta Platforms.
Previously known as Facebook, the Menlo Park, California-based social media company has a $550.87 billion market cap; its shares were trading around $202.68 on Wednesday with a price-earnings ratio of 14.84, a price-book ratio of 4.46 and a price-sales ratio of 4.83.
The GF Value Line
The GF Value Line suggests the stock is significantly undervalued currently.
GuruFocus rated Meta Platforms’ financial strength 8 out of 10, driven by a comfortable level of interest coverage and a robust Altman Z-Score of 10.6 that indicates it is in good standing. The return on invested capital also overshadows the weighted average cost of capital, suggesting the company is creating value as it grows.
The company’s profitability fared even better with a 10 out of 10 rating. Despite recording a decline in its margins, Meta is supported by strong returns on equity, assets and capital that top a majority of competitors. It also has a high Piotroski F-Score of 7 out of 9, indicating conditions are healthy. Consistent earnings and revenue growth contributed to a 4.5-star predictability rank. According to GuruFocus, companies with this rank return an average of 10.6% annually over a 10-year period.
Of the gurus invested in Meta, Ken Fisher (Trades, Portfolio) has the largest stake with 0.34% of its outstanding shares. Baillie Gifford (Trades, Portfolio), Dodge & Cox, Frank Sands (Trades, Portfolio), Chase Coleman (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Chris Davis (Trades, Portfolio) and several other gurus also have significant positions in the stock.
Bank of America
The investor increased his Bank of America (BAC, Financial) stake by 18.03%, buying 2.23 million shares. The transaction had an impact of 3.72% on the equity portfolio. Shares traded for an average price of $45.61 each during the quarter.
Li now holds a total of 14.6 million shares, which represent 24.36% of the equity portfolio and is his second-largest holding. GuruFocus estimates he has gained 40.41% on the investment since establishing it in the first quarter of 2020.
Li’s holding history of Bank of America.
The bank, which is headquartered in Charlotte, North Carolina, has a market cap of $365.89 billion; its shares were trading around $45.17 on Wednesday with a price-earnings ratio of 12.73, a price-book ratio of 1.49 and a price-sales ratio of 4.35.
According to the GF Value Line, the stock is significantly overvalued currently.
The GF Value Line suggests the stock is significantly overvalued currently.
Bank of America’s financial strength was rated 3 out of 10 by GuruFocus. Despite issuing approximately $23.8 billion in new long-term debt over the past three years, it is still at a manageable level.
The bank’s profitability scored a 5 out of 10 rating on the back of margins and returns that outperform over half of its industry peers. Bank of America also has a moderate Pitroski F-Score of 6, which indicates operations are typical for a stable company. Despite recording a slowdown in revenue per share growth, it has a one-star predictability rank. GuruFocus data shows companies with this rank return, on average, 1.1% annually.
With 12.5% of Bank of America’s outstanding shares, Buffett is by far its largest guru shareholder. Other top guru investors include Dodge & Cox, PRIMECAP Management (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Davis and the Parnassus Endeavor Fund (Trades, Portfolio).
Pinduoduo
Impacting the equity portfolio by -1.53%, the investor dumped all 363,165 shares of Pinduoduo (PDD, Financial). The stock traded for an average per-share price of $78.43 during the quarter.
GuruFocus data shows he lost an estimated 34.78% on the short-lived investment, which was established in the fourth quarter of 2020.
Li’s holding history of Pinduoduo.
The Chinese agriculture-focused tech company, which connects farmers and consumers through a platform that allows them to buy and sell fresh produce, has a $66.26 billion market cap; its shares were trading around $53.07 on Wednesday with a price-book ratio of 7.37 and a price-sales ratio of 4.99.
Based on the GF Value Line, the stock appears to be significantly undervalued currently.
The GF Value Line suggests the stock is significantly undervalued currently.
GuruFocus rated Pinduoduo’s financial strength 7 out of 10, driven by an Altman Z-Score of 3.58 that indicates it is in good standing.
The company’s profitability did not fare as well, scoring a 1 out of 10 rating. Although the margins are negative, its returns outperform a majority of competitors. Pinduoduo also has a moderate Piotroski F-Score of 5.
Baillie Gifford (Trades, Portfolio) has the largest stake in Pinduoduo with 2.32% of its outstanding shares. Additional gurus with notable investments in the stock include Coleman, Fisher, Ray Dalio (Trades, Portfolio) and Simons’ firm.
Portfolio composition and performance
Li did not make any other changes to his holdings during the quarter.
Himalaya’s $2.67 billion equity portfolio, which is composed of six stocks, is most heavily invested in the technology and financial services sectors, followed by a much smaller exposure to the communication services space.
Li’s portfolio composition by sector.
The guru’s other holdings as of Dec. 31 were Micron Technology
Li’s top holdings.
Disclosures
I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The views of this author are solely their own opinion and are not endorsed or guaranteed by GuruFocus.com.
Source: https://www.forbes.com/sites/gurufocus/2022/02/25/li-lu-bulks-up-meta-and-bank-of-america-positions-sheds-pinduoduo/