Charlie Munger is one of the big names in value investing, besides Warren Buffett. As many know, he is also the vice chairman at Berkshire Hathaway and longtime business partner of Warren Buffett. He told CNBC back in 2018 that China’s best companies are cheaper than those in the US and it should not be very hard to find four or five companies in China to invest.
And he’s not the only one optimistic of China’s future.
Other famous fund managers who are looking into China stocks
Jim Rogers who is the co-founder of the Quantum Fund and Soros Fund Management shared the optimism “I’m interested in buying Chinese shares because they’re cheaper than the US and most other stock markets. China certainly seems to have handled the virus much better than most countries did. I see what’s happening in the streets and in the restaurants. I see the people are going to dance halls and gym classes and everything else.”
Ray Dalio, founder of Bridgewater Associates (currently the largest hedge fund in the world) is also bullish on China.
Munger’s latest filings show conviction
In his recent 13F filing, Charlie Munger took a stake in Alibaba last quarter, adding 165,000 American depositary shares (ADS) in Alibaba worth $37 million making this his top 3 holdings after Bank of America and Well Fargo.
This recent add of Alibaba signals Charlie Munger’s long term prospects of this stock and his presence in the China market.
Both Warren Buffett and Charlie Munger are not new to the China market. In an interview, Charlie revealed that his family had already started in China 17 years ago.
Berkshire Hathaway was also an early investor in the China market. They invested $500 million into Petrochina Company Limited back in 2002-2003, which has turned into $3.5 billion within 5 years. The capital that Buffett put to work in PetroChina compounded at about 55% annually between 2002 and 2007.
An interviewer asked “How did it come to your attention? How do you find a stock like PetroChina?”
Buffett replied, “I sat there in my office and I read an annual report, which fortunately, was in English and it described a very good company. It talked about the oil reserves, talked about the refining, and talked about the chemical and everything else. I sat there and read it, and thought to myself ‘this company’s worth about 100-billion’. Now, I didn’t look at the price first. I look at the business first, and try to figure out what it’s worth because if I look at the price first, I’ll be influenced by that. I look at the company first. I try to value it. Then I look at the price and if the price is way less than what I’ve just valued it at, I’m going to buy it.”
You can watch the full interview here.
Berkshire Hathaway’s investment in BYD
Another impressive China investment by Berkshire Hathaway was a 3000% gain on a stock they bought in the year 2008. It is none other than the Chinese electric-vehicle company BYD. Their initial investment of $232 million is now $7 billion and growing. They even have a larger stake in BYD than in General Motors.
However, it is not always smooth sailing. BYD share price suffered a mass sell down which plunged its price from HK$77 to HK$13 in 2010 to 2011. I don’t think they would have sold BYD even through the sell down, they must have had a god-like conviction of the company’s strong fundamental in order to hold through to the end.
I believe that if you told anyone to invest in China, most might not trust the system as there were many fraudulent companies in China (remember Luckin Coffee?).
So, with all these going on, why and what got Charlie Munger into the China Market?
Perhaps Charlie Munger has already foreseen the emerging market that China is going to be and the growth opportunities out there, or someone that he knows is giving him another perspective since that China market isn’t a market that he is familiar with.
It is none other than Li Lu who advises on most China stock pick.
Li Lu, the founder and chairman of Himalaya Capital, a China focused investment fund headquartered in Seattle who is famously known to be the only other person that Charlie Munger trusts with his money. Munger and others also called Li Lu the Chinese version of Warren Buffett.
What Charlie Munger likes about Li Lu is partly because he is a Chinese Warren Buffett and that he is fishing in China which is not an over-searched, over-populated, highly competitive American market.
Here’s a short video on Munger’s view of China during the recent Berkshire Hathaway:
Being an all time fan of both Warren Buffett and Charlie Munger, this is also one of the reasons why I’m bullish of China in the long run. There are many predictions that China might eventually overtake the US in the coming years, but even if it did not, China will still remain as the second largest economy in the world. It is a market that we shouldn’t be missing out on.
If you are interested in China stocks, join Alvin at his next live webinar where he’ll share:
- How to grow your portfolio by riding on China’s growth?
- Why we’re bullish on China stocks, and why you should have some exposure in them for crazy potential growth, in the coming years
- 3Cs: The unique framework designed for China investors
- Where to find unlimited China Stocks investing ideas?
- and more