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many of the 13f filings by hedge fund managers were filed this week this is a great opportunity to see smart money buys over the past quarter one investor in particular that i follow closely is lee liu who was nicknamed the warren buffett of china you know he has a pretty good reputation if charlie munger and monash per bry are asking him questions and getting his insight on stocks and the economy there's a well-known story of lulu in college when he attended a seminar by warren buffett because he thought there was going to be free food at the event he didn't even care or even know who warren buffett was at the time however that lecture changed his life forever and propelled his investing career so we're going to take a look at lee liu's portfolio in this video see the changes he made last quarter hey everybody if this is the first video you've seen of mine my name is justin linderink i have been an account for about 20 years and i'm a husband and a father of four awesome kids during my free time you will find me working on youtube reading some kind of investment book interacting on my discord channel researching stocks or playing with my kids as an investor i am trying to find great companies with great management that are trading below their intrinsic value i started out with phil towne's rule one investing strategy and i've branched out over time looking for companies that are going to compound for a very long time at a high rate i'm in the mindset now to set and forget it when it comes to stocks so now let's focus on lilu and his portfolio what you see on your screen is leeloo's holdings as of december 31st 2021.
currently lilu has seven holdings in his portfolio he owns many of the fang stocks including meta google and apple in one of the recent quarters he invested in warren buffett's berkshire hathaway lilu reduced his byd position by 13 percent which is his biggest position in his portfolio sitting around 50 percent he purchased byd from the hong kong exchange if you were unfamiliar with byd the company was founded back in 1995 and generates revenue a few different ways such as designing and manufacturing batteries it also develops leases and sells residential properties over the last three years the company stock has gone 364 percent which is an annualized growth rate of 66 percent so i think lilu knows how to pick stocks byd is headquartered in china however i really want to focus on two stocks where he added to his positions as bank of america and meta also known as facebook let's first start with facebook lilu added 303 000 shares in the quarter increasing his facebook stake by 53 percent now we don't know if he bought the shares before or after zuckerberg announced facebook was renaming the company pivoting the company towards the metaverse if i had to make an educated guess here i would bet that he did it in october after it was announced that they were going to the metaverse because the stock took a dive on that news it also makes me believe he bought after the announcement because lee liu has been shedding his facebook position stock over the last few quarters including q4 2020 and q1 2021 so i think there's a couple of things we can take from this number one lilu believes facebook was undervalued in the fourth quarter keep in mind the company is trading around 30 percent lower from around he bought the stock so it certainly is cheaper now you never know what fund managers intentions are when they sell stock for example they may sell a stock to take advantage of tax loss harvesting or maybe there's clients are requesting some withdrawal of funds so they have to sell stocks in order to cover the transactions however you know exactly why managers buy a stock they want to make money plain and simple now number two even though lilu increases facebook's position by 53 percent it only represents roughly seven percent of his portfolio to put in perspective micron is 25 his portfolio and bank of america is 15 of his portfolio we already mentioned byd being 50 of his portfolio so facebook still re represents one of the smaller positions in his portfolio fourth quarter also keep in mind that the stock was 294 dollars at the end of the quarter so it will be interesting to see if lulu adds to his position for q1 2022 with the recent drop something else i find interesting about facebook is taking a look at what super investors are doing as a whole with the stock in q4 there was a lot of concern from investors and the market on the capital required for the metaverse which generated more selling and the decrease in stock price however we are not seeing the selling of super investors in fact if we take a look at the super investors that own facebook stock i can't even get them all on one slide there are dozens of super investors who own facebook if we strictly look at the super investors who own the highest portion of meta stock in their portfolio we will see that six of them added to their position in the quarter two of them did nothing and the other two reduced their positions now i should mention that one of the fund managers who sold pars position was david tepper but he has been reducing a bunch of his positions over the last few quarters that leads me to believe that the metaverse announcement was not concerning to these folks and adds conviction to facebook shareholders for me i've been saying this is a good thing for facebook to go into the metaverse yes we don't know what the total cost will be but they have 50 billion dollars of cash sitting on their balance sheet and legacy business that generates a ton of free cash flow and that they can throw at this virtual reality world if facebook can be the company that controls the metaverse they can control the cost i'm sure the government will play some type of role with privacy and access but i think this is a very very big deal the one thing that i've harped on facebook about is that they are terrible capital allocators absolutely terrible they just let billions of dollars grow on their balance sheet and they do not imp deploy it anywhere however if i look at other companies that are great allocators such as amazon microsoft and 10 cent these companies either add money back into the company through r d improving future growth potential buying other companies to add different revenue streams or invest in other companies returning a high rate of return on investment facebook has done nothing and zuckerberg knows he better do something soon or he's going to run the risk of his legacy platforms deteriorating over time so the other company that lilu added in the quarter was bank of america i gotta say this was a little perplexing to me i'm not someone in a position to question lee liu with his investing background and great returns but i just don't understand this one bank stocks in general seem to be stretched and bank of america in particular doesn't look that attractive in the quarter the bank was trading around a price to book ratio of 1.45 which is considerably higher than the price-to-book ratio of around one back in december 2020.
lilu must see some sort of catalyst here that i don't see if we look at what other super investors did in the quarter only one other manager actually bought bank of america while four others reduced their position i'll have to dig into bank of america more some other time to see why lulu likes this stock nonetheless he added to his position and must think it is a good value just like warren buffett lilu has a good track record with bank stock so i'm not betting against him another stock we haven't mentioned yet is berkshire hathaway lilu bought warren buffett's company two quarters ago representing six percent of his total portfolio he didn't add or reduce his position in the fourth quarter the stock is up around 15 percent over the last two quarters so that is a healthy return so far when i look at different valuation metrics berkshire does look fairly attractive even right now for example the ev to ebit acquires multiple is coming in around six today but was around four when lilu bought into the business if i look back a few years ago berkshire typically trades around a 10 to a 20 acquires multiple so based on this metric alone it looks cheap even at today's stock price of around three hundred and twelve dollars now if i do a 10 cap valuation that looks at owners earnings i get intrinsic value of 388 dollars so that is a margin of safety of around 20 percent so certainly looks interesting at today's price if we take a look at what super investors did with berkshire stock in the quarter while they were certainly sellers nine sellers and only one buyer of the stock okay so that was lilu's portfolio for the fourth quarter not a lot of activity but certainly the additions of facebook and bank of america say a lot what do you think about lee liu's moves in the quarter were you surprised at all do you own any of the stocks mentioned today is there any particular super investor you would like me to do a review on if so drop a comment down below and i will be sure to respond thank you so much for watching i will catch you on the other side take care and god bless you
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