Li Lu is a well-known Superinvestor who has achieved a compounded annual return of about 30% since 1998.
Legendary investor Charlie Munger chose him to manage his money.
Today, I’ll explain Li Lu’s outperforming strategy👇🏼
Legendary investor Charlie Munger chose him to manage his money.
Today, I’ll explain Li Lu’s outperforming strategy👇🏼
Why Value Investing Works
The market isn’t built for value investors.
It is built in a way that incentivizes speculation.
That’s why businesses are so often misprized in the short term.
Value investors can benefit from this circumstance.
The market isn’t built for value investors.
It is built in a way that incentivizes speculation.
That’s why businesses are so often misprized in the short term.
Value investors can benefit from this circumstance.
You're a Journalist
Being an investor is a lot like being a research journalist.
You have to dig into the company on a level that journalists do when they research their stories.
You also need to clearly articulate your thesis and research and bring it to paper.
Being an investor is a lot like being a research journalist.
You have to dig into the company on a level that journalists do when they research their stories.
You also need to clearly articulate your thesis and research and bring it to paper.
Understand Who You Are
You’ll be more interested in some industries/companies than in others.
In investing, you can choose in what industries you’ll look for opportunities.
Investors should use this advantage and be sure about their circle of competence.
You’ll be more interested in some industries/companies than in others.
In investing, you can choose in what industries you’ll look for opportunities.
Investors should use this advantage and be sure about their circle of competence.
Seek Truth, Ignore Ego
A journalist also has to find the truth before he publishes a story.
The same goes for an investor. Mistakes of ego are often fatal.
Seek the truth and change your opinion with the facts.
Do not care about being right.
A journalist also has to find the truth before he publishes a story.
The same goes for an investor. Mistakes of ego are often fatal.
Seek the truth and change your opinion with the facts.
Do not care about being right.
Commitment Bias
One of the most fatal biases is the commitment bias.
To avoid this one, Li Lu rarely agrees to public appearances.
The more you talk about investments, the more you talk yourself into them.
The perceived knowledge about a company increases for no reason.
One of the most fatal biases is the commitment bias.
To avoid this one, Li Lu rarely agrees to public appearances.
The more you talk about investments, the more you talk yourself into them.
The perceived knowledge about a company increases for no reason.
ROIC
Just like Charlie Munger, Li Lu emphasizes the importance of ROIC as a metric for superior performance and competitive advantages.
The longer your holding period, the more your return will equal the ROIC of the underlying company.
Just like Charlie Munger, Li Lu emphasizes the importance of ROIC as a metric for superior performance and competitive advantages.
The longer your holding period, the more your return will equal the ROIC of the underlying company.
Stocks are Volatile, Businesses are not
Stock prices are a lot more volatile than the business behind that stock.
Investors should pay attention to underlying, long-term changes in the business instead of stock prices.
Stock prices are a lot more volatile than the business behind that stock.
Investors should pay attention to underlying, long-term changes in the business instead of stock prices.
Margin of Safety is Self Defense
To Li Lu, the Margin of Safety is a concept of self-defense.
Even if the company is more valuable than the market gives it credit for, the management could destroy this advantage.
This possibility is something investors have to look out for.
To Li Lu, the Margin of Safety is a concept of self-defense.
Even if the company is more valuable than the market gives it credit for, the management could destroy this advantage.
This possibility is something investors have to look out for.
Uninvestable
Some industries are impossible to value.
Li Lu gives the example of restaurants.
Even if the business is great, there are little to no durable advantages.
Investors shouldn’t try the impossible and just focus on what can be valued.
Some industries are impossible to value.
Li Lu gives the example of restaurants.
Even if the business is great, there are little to no durable advantages.
Investors shouldn’t try the impossible and just focus on what can be valued.
That's it for today!
If you enjoyed it, please Like and Retweet this Thread so more people can see it!
Follow me @MnkeDaniel to learn more about Investing.
Have a great day!
If you enjoyed it, please Like and Retweet this Thread so more people can see it!
Follow me @MnkeDaniel to learn more about Investing.
Have a great day!
Here's a beautiful article by Li Lu where he explains how to outperform the market and how value investing works in China:
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You'll find:
- Investing Articles
- Free PDFs of Investment Letters, Speeches, and Investing Classes
- Book Recommendations on Investing, Valuation, Psychology, etc.
- A Thread Archive
danielmnke.com
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