🗞 "The Warren Buffett of China"

Happy Sunday!

Here’s what’s on the docket for this week’s newsletter:

• 📊 4 Most Impressive Charts of Earnings Season Week 1

• 💼 “The Warren Buffett of China”

Let’s dive in!

4 Most Impressive Charts: Week 1

Q1 kicked off this week with just over 1,000 companies reporting and as always, FinChat’s data team was busy capturing all the available data points.

Here are the 4 most impressive charts we found this week:

1. Interactive Brokers - Account Growth

Interactive Brokers added more new customers this quarter than any previous quarter in the company’s history, including during the market euphoria of 2021.

2. ASML - Buybacks

This quarter, ASML spent the 2nd most it ever has on buybacks.

These heightened repurchases also came during a quarter when ASML reached an EV/EBIT multiple of 22x, its lowest valuation in more than 5 years.

3. Hermès v. LVMH - Handbag Revenue

In a difficult spending environment, Hermès is demonstrating what it means to be a true luxury brand.

While both Hermès and LVMH sell high-end handbags, we’re seeing the resilience of Hermes’ truly exclusive merchandise.

4. American Express - Average Fee per Card

American Express has seen a complete resurgence in popularity over the last 5 years.

On top of adding more than 30 million new cardholders, the price people are willing to pay to use an American Express card has nearly doubled over the last 5 years.

A.U.M. Podcast

Shreekkanth Viswanathan - A Concentrated, Quality Investor

This week the FinChat team interviewed Shreekkanth Viswanathan, the founder and portfolio manager of SVN Capital.

On this episode Shree details SVN’s concentrated approach and focus on high-quality businesses with long runways for reinvestment. In particular, we discussed two of SVN’s portfolio companies, Dino Polska and Kinsale Capital.

Li Lu: “The Warren Buffett of China”

There’s perhaps no investor in the world that has a crazier life story than Li Lu.

From being taken from his parents as an infant, to surviving one of the deadliest earthquakes in history, to helping lead the Tiananmen Square protests, to being forced into hiding and eventually escaping China through a smuggling route, you could be forgiven for thinking his story was fiction.

But at 23 years old, Li Lu finally arrived in the United States and was granted asylum by the US government. And from there he didn’t waste much time.

Lu, who had already majored in Physics at Nanjing University in China, learned English in a single summer and enrolled at Columbia University where he earned a degree in Economics and simultaneous graduate degrees in Business and Law.

While at Columbia, Lu mistakenly attended a lecture given by Warren Buffett after mishearing a friend and thinking there was a free buffet. As it turns out, that lecture would change his life.

Starting Himalaya Capital

Despite being heavily recruited by many of the top hedge funds and investment banks after graduating from Columbia, Li Lu decided to go his own way.

After being inspired by Buffett’s lecture, Lu began following the value principles that Buffett espoused and investing his own money. In doing so, Lu made some meaningful returns. So much so that in 1997 he decided to launch a hedge fund of his own called Himalaya Capital.

During the early days of running Himalaya Lu attended a dinner at a friend’s house in LA where he met Charlie Munger. The two stayed in touch and 7 years later, Munger finally inquired to learn more about the fund.

In Lu’s words “at a Thanksgiving gathering in 2003, we had a long heart-to-heart conversation. I introduced every single company I have invested in, or researched, or am interested in to Charlie and he commented on each one of them.”

At the end of the conversation Munger did something he’s never done. He told Lu that he would invest in Himalaya on the condition that he not take on any additional investors. Lu agreed, and in 2004 Munger wrote Himalaya an $88 million check to manage.

Li Lu’s Best Investments

After receiving the investment from Munger, Lu immediately began buying up shares of two Chinese businesses that have both delivered remarkable returns for investors.

BYD

In 2004, BYD was just a little-known maker of electric batteries. Today, they’re the largest electric vehicle company in the world.

BYD is perhaps the closest thing the world has to a vertically integrated clean energy company, and they have dominated the market through technological innovations and the hard-nosed efficiency that Chinese manufacturers are famous for.

Li Lu not only found this investment for himself early on but was able to do enough convincing with Charlie that Berkshire Hathaway even took a 10% stake in the company in 2008.

Since 2004, shares of BYD are up 7,826%, or a 23% annual return.

Kweichow Moutai

Unlike BYD, by the time Li Lu began buying shares of Kweichow Moutai, the company was already an established leader in the Chinese alcohol industry. However, its already significant size did not diminish returns for investors.

After the communist revolution, China boomed and the purchasing power of Chinese consumers soared. This led to significant growth in volume for Moutai’s popular baiju brand.

Beyond strong sales growth, Moutai’s business model has some attractive characteristics that helped them expand profit margins as well. The grains required to make baiju are extremely low-cost and can only be grown in certain geographies. Thanks to the minimal input costs and restricted supply Moutai is able to generate 92% gross margins today.

Since 2004, Kweichow Moutai’s stock is a 287-bagger and is now the largest alcohol company in the world by market cap.

Meme of the week

After several weeks now of flip-flopping on tariff policy, US President Donald Trump attempted to shift some blame towards Jerome Powell for the Federal Reserve’s resistance against lowering interest rates.

Trump, who has been pushing for lower rates in an effort to counteract market turbulence caused by his recent tariff announcements, stated this week “Powell’s termination cannot come fast enough”.