Is Li Lu Going to Be Buffett's Successor?

by: Matt Pauls

It appears to me very clear that the first in line for Warren Buffett's position as Investment Officer is Li Lu. Several years back I had the privilege to hear Li Lu speak, and he is no question, the real deal.

Li Lu was born in 1966 and was raised in China. He was one of the principle student leaders during the Tiananmen Demonstration in 1989, and was fortunate to escape to the United States later that year.

Li Lu attended Columbia University from 1990 to 1996 and received three degrees simultaneously: a B.A. in Economics from Columbia College, a J.D. from Columbia Law School, and a M.B.A. from Columbia Business School. Shortly thereafter Li Lu began a career as a money manager. Naturally, Li Lu is an avid student of both Warren Buffett and (especially) Charlie Munger.

With respect to Investment Manager succession, Munger provided a few very clear and important pieces of information recently, though not intending to explicitly do so.

It's important to notice that both Berkshire Hathaway (NYSE:BRK.A) and Li Lu own significant interests in BYD Company Limited (OTCPK:BYDDY).

The first question is who found BYD first, Berkshire Hathaway or Li Lu?

BYD's Report of the Directors, identifies Li Lu as a significant Shareholder in 2006. (See here )

Prior to this year's Berkshire Hathaway annual meeting in an interview with Becky Quick of CNBC on Friday April 30th, Charlie Munger says, "I have this young Chinese-American partner that found it (NYSE:BYD) for us."
(source; 17:25)

Additional information was provided during Berkshire Hathaway's annual meeting. When asked whether any of the managers on Buffett and Munger's list employed the use of leverage, Buffett answered, "No." Charlie followed, "One of the managers returned over 200% last year, without any leverage at all." (Buffett did not appear very happy with this comment.)

As previously mentioned, Li Lu has a significant amount of his portfolio invested in BYD, which increased well over 200% last year.

The final and most compelling piece of information was documented today. During the Wesco Financial annual shareholders meeting, Charlie openly identified Li Lu as an outstanding money manager, but did not elaborate to suggest he would replace Buffett.

Still not convinced?
Li Lu operates his partnership out of Pasadena California, which also happens to be home to Charlie Munger. According to Thomson Financial, Li Lu's partnership address is in the same building as Wesco Financial Corporation (NYSEMKT:WSC-OLD), two floors below.

Charlie, please don't hold this against me.

Disclosure: Long (BRK.A)