Li Lu, founder of Himalaya Capital and a follower of Charlie Munger, believes Chinese stocks offer better opportunities now than in the past. He noted that Chinese equities are cheaper than U.S. stocks relative to their growth prospects, making them a potentially attractive hunting ground for value investors.
The perspective from a prominent value investor like Li Lu, influenced by Charlie Munger, suggests that despite geopolitical tensions and market divergence, Chinese equities may offer compelling valuations for investors seeking opportunities outside the U.S. market.
Li Lu, founder and chairman of value investment firm Himalaya Capital and a noted disciple of legendary investor Charlie Munger, has stated that shares in Chinese companies present better investment opportunities today than in the past. His comments come amid a divergence between markets in China and the U.S.
Munger himself has previously expressed a similar sentiment, noting that he believes the Chinese stock market is cheaper than the American market and that China has a bright future. He described China as a "happier hunting ground for the value investor," suggesting that shrewd individuals can find more bargain stocks there than in the United States. Munger indicated that he is willing to take on a bit more risk to invest in better companies at lower prices, a core principle of value investing.
Data from March 31 shows the Shanghai market trading at a price-to-earnings ratio of 7.6x and a cyclically adjusted price-to-earnings (CAPE) ratio of 14.4. In comparison, the U.S. market trades at a P/E ratio of 22.7x and a CAPE ratio of 27.5.
Li Lu has a long history of investing in Chinese stocks and private businesses in Asia, with reports suggesting his hedge fund Himalaya Capital has achieved annualized returns of 20%. Munger has previously entrusted Li Lu with managing a portion of his fortune, highlighting a close relationship and likely discussions about investment ideas.
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