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Hello, this is Modeun Chaeso. Today is April 20, 2024. In this video, we will look into two stocks that make up 70% of the portfolio of Li Lu, a disciple of Warren Buffett. Let's see if we should take an interest in these two stocks and buy them accordingly. Here is a Motryful article. Many people try to follow Warren Buffett's investment strategy, but it is not easy to achieve the same level of success.
One person who did quite well is Charlie, Buffett's right- hand man, who entrusted his management to Lu. A Chinese-born value investor, he operates the Himalayan Capital Management fund. This fund started decades ago. This disciple of Warren Buffett has managed a portfolio particularly focused on U.S.
listed stocks, and in fact, based on the latest update of the Himalayan Capital Fund, approximately 70% of the U.S. portfolio consists of two stocks: Bank of America and Alphabet. Let's find out why he liked these two stocks so much. First, regarding Bank of America, less than 30% of Li Lu's U.S. stock portfolio is in Bank of America.
As one of the world's largest banks, this bank provides various financial services to individual and corporate customers... We provide services. There are four reporting segments: Consumer Finance, Asset Management, Global Banking, and Global Markets. Each of these business units generated over $1 billion in net profit last quarter, and the total net profit for the four business units reached $6.7 billion.
Bank of America continues to add clients to its banking sector, registering 245,000 accounts last quarter, and remains one of the world's top investment banks. While not a hyper-growth stock, this allows Bank of America to maintain consistent operations year after year. There is a high likelihood of owning the stock because it is undervalued and returns capital to shareholders.
The stock is traded as a single Price to Book Private Bank (PB) unit. PB is the bank's most useful valuation indicator as it informs investors of the stock price and net asset value. Bank of America currently records a 99% ROE, which has hovered between 8% and 12% over the past few years, representing the return derived from this book value.
Through these returns, Bank of America pays a 2.7% dividend to shareholders. Over the past 10 years, it has repurchased shares, reducing outstanding shares by 25%. Along with returning capital to shareholders through dividends, these consistent profits are likely the result of Bank of America having made a significant position, accounting for 30% of its portfolio.
This blue-chip stock will continue to provide shareholders with guaranteed returns going forward. Next, is it the first stock evaluated among the Alphabet Magnificent 7 stocks? Another stock accounting for nearly 40% of Himalayan Capital's U.S. portfolio is Bank of America. Alphabet, a tech giant, is enjoying reasonable valuation and steady growth.
Alphabet's price-to-earnings ratio has remained below the market average for several years. Despite the stock price rising 77% since early 2023, it remains slightly below the S500 average at a PE ratio of 27. Although Lu began buying the stock for the first time in 2020 amidst market turmoil caused by the COVID-19 pandemic, he has not done so recently.
Despite almost always trading below the S500 average buy-back, Alphabet is growing much faster than the average company. Last year, revenue increased by 99% to reach $37 billion, which is a 10% increase from the previous year. Furthermore, it is at the highest level. Google Search continues to grow rapidly alongside the rapid growth of YouTube and Google Cloud.
YouTube currently accounts for nearly 10% of U.S. TV viewership and generated $9.2 billion in advertising revenue last quarter. Google Cloud also recorded $9.2 billion in revenue, growing 26% year-over-year. Alphabet appears poised to grow for years to come. With its earnings multiple just below market level, investors believe it is advisable to own this stock.
So far, we have looked at the two stocks that make up 70% of Warren Buffett's disciple, Lilu. Warren Buffett does not currently own Alphabet, does he? Now, here is the chart for Bank of America. It appears to be entering the beginning of another major bull market. For now, this stock is in an upward trend.
Even looking at the daily chart, you can see that it is currently rising. Now, here is the Alphabet chart. Looking at the daily chart, you can see it is continuously rising, and the overall trend can also be seen as currently upward. What we should note here is that while it is rising, it is not going straight up; instead, it is rising in a stair-like fashion.
In other words, looking at the company's growth potential, one should not continuously buy or sell. You can see that even if you just press it, it yields good results. That’s all for today. We’ve looked into two companies, so I’ll wrap up the video. Thank you.
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