Himalaya Capital Management founder Li Lu (Trades, Portfolio) released his second-quarter portfolio earlier this week.
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 only a small fraction of the portfolio.
Keeping these criteria in mind, the 13F filing for the three months ended June 30 show he divested of the Micron Technology Inc. (MU, Financial) stake and added to his holding of East West Bancorp Inc. (EWBC, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Micron
Following a reduction in the first quarter, Li sold his 6.82 million remaining shares of Micron Technology (MU, Financial), which had an impact of -20.20% on the equity portfolio. The stock traded for an average price of $64.22 per share during the quarter.
Previously his second-largest holding, GuruFocus data shows Li gained an estimated 26.95% on the investment over its lifetime.
The semiconductor company based in Boise, Idaho has a $70.19 billion market cap; its shares were trading around $64.08 on Thursday with a forward price-earnings ratio of 525.18, a price-book ratio of 1.54 and a price-sales ratio of 3.87.
The GF Value Line suggests the stock is significantly overvalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 77 out of 100, the GF Score indicates the company is likely to have average performance going forward. While the company received high ratings for momentum, growth and profitability, its financial strength is more moderate and its value rank is low.
While the Altman Z-Score of 3.45 indicates Micron Technology is in good standing, its Piotroski F-Score of 4 out of 9 means its operations are typical of a stable company. Its predictability rank of 2.5 out of five stars, however, is on watch due to a decline in revenue per share in recent months. According to GuruFocus research, companies with this rank return an average of 7.3% annually over a 10-year period.
Of the gurus invested in Micron Technology, PRIMECAP Management (Trades, Portfolio) has the largest stake with 3.47% of its outstanding shares. Andreas Halvorsen (Trades, Portfolio), Prem Watsa (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Hotchkis & Wiley, the Parnassus Value Equity Fund (Trades, Portfolio), Daniel Loeb (Trades, Portfolio), David Tepper (Trades, Portfolio) and Charles Brandes (Trades, Portfolio) also have notable positions in the stock.
East West Bancorp
The guru expanded his stake in East West Bancorp (EWBC, Financial) by 20.91%, picking up 480,051 shares. The transaction had an impact of 1.41% on the equity portfolio. During the quarter, shares traded for an average price of $50.82 each.
Li now holds 2.77 million shares, which occupy 8.18% of the equity portfolio. It is now his smallest holding. GuruFocus found he has lost 16.22% on the investment so far.
Headquartered in Pasadena, California, the bank holding company, which is the parent of East West Bank, has a market cap of $7.83 billion; its shares were trading around $55.34 on Thursday with a price-earnings ratio of 6.20, a price-book ratio of 1.21 and a price-sales ratio of 3.08.
According to the GF Value Line, the stock is significantly undervalued currently.
The GF Score of 86 means the company has good outperformance potential on the back of high ratings for profitability, value and growth as well as more moderate financial strength and momentum ranks.
The company’s Piotroski F-Score of a perfect 9 means its operations are healthy. Further, it has a five-star predictability rank. GuruFocus found companies with this rank return, on average, 12.1% annually.
With a 1.96% stake, Li is the company’s largest guru shareholder. East West is also being held by Cohen, Ken Fisher (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, the CI Select Canadian Equity Fund (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).
Portfolio composition
Li did not make any other changes to his holdings during the quarter.
Himalaya’s $1.79 billion equity portfolio, which is composed of six stocks, is most heavily invested in the financial services and communication services sectors, followed by a smaller exposure to the tech space.
The guru’s other holdings as of June 31 are Bank of America Corp. (BAC, Financial), both classes of Alphabet Inc. (GOOG, Financial) (GOOGL, Financial), Berkshire Hathaway Inc. (BRK.B, Financial) and Apple Inc. (AAPL, Financial).
