$2 Billion Fund Bets It All On 5 Stocks

You probably haven’t heard of Himalaya Capital Management. It’s a Seattle, Washington-based firm that has approximately $2 billion in assets under management. Now put yourself in the shoes of the investment team for a moment: how would you invest that chunk of change?

Most investors would spread the money around a bit but the Himalaya team has chosen to embrace the philosophy that if you have conviction in your investment themes, it’s better to concentrate the portfolio in fewer stocks. And so they have. In fact, their entire portfolio comprises just 5 stocks. You can bet these were heavily screened given that the Himalaya team bet the farm on them, so what are they?

Key Points

• The Himalaya investment team has chosen to concentrate their portfolio in just 5 stocks rather than diversifying to a broader portfolio of stocks. The largest position in their portfolio is Micron, which commands 33.9% of the portfolio. 
• While the Himalaya investment team appears heavily concentrated in just a few stocks, the selection of Berkshire Hathaway offers broad diversification through its numerous businesses and equity shareholdings.
• The portfolio holding with most upside is Bank of America while Micron is the firm’s largest holding.

$2 Billion Portfolio in 5 Stocks

The first thing to note is that the largest position in the portfolio is Micron, and commands an astonishing 33.9% of the portfolio. At the time of our research, the fund had $1.87 billion under management and a full $634 million was invested in MU.

We took out the proverbial pen and paper to find out why they invested so heavily in Micron. And what we discovered was Micron has 22.5% upside to fair value of $69 per share.

Interestingly, that places Micron in the second lowest position across the Himalaya portfolio on a valuation leaderboard. Bottom of the pile is Apple, which is 6.2% overvalued and commands a 5.5% portfolio weighting.

Top 3 Stocks with Most Upside

The top 3 positions is where arguably the biggest opportunities lie for casual observers.

In the bronze position sits Berkshire Hathaway, which has 27.1% upside to $393 per share for B-shares or $593,000 for A-shares. Himalaya has apportioned 13.1% of its capital or $245 million to Buffett’s company. This is a particularly interesting selection because Berkshire inherently offers Himalaya diversification through its 60+ wholly-owned businesses and numerous public equity shareholdings. So, although Himalaya appears heavily concentrated in just a few stocks it actually has rich exposure to a wide variety of sectors.

Coming in #2 on the valuation table, based on our calculations, is Alphabet, which we see as having upside potential of 30.2% to $123 per share.

Concerns are rife that Alphabet’s flagship product, Google Search, will be disrupted by ChatGPT and along with it, Alphabet’s primary revenue stream. In fact, the odds of that happening are slim. And it would take years to do so, even if Alphabet sat on its hands and twiddled its thumbs. In practice, a “code red” alerts has disseminated through the halls of Alphabet and it’s already rapidly taking action to address the threat.

#1 Portfolio Stock with 39.5% Upside

When we ran the numbers, the company with most upside in the Himalaya portfolio was Bank of America, which could rise as much as 39.5% to $45 per share before hitting a valuation ceiling. The investment team has allocated 24.2% of its assets, corresponding to $454 million to this one position. Interestingly, that eclipses its Alphabet holding, which represents 17.8% of its portfolio.