Charlie Munger called Li Lu "The Chinese Warren Buffett."
He once gave Li Lu $88m, and Li quintupled that investment.
Li also achieved a 30% CAGR for over a decade of running his fund.
Here are 9 Investing Principles he lives by 👇
He once gave Li Lu $88m, and Li quintupled that investment.
Li also achieved a 30% CAGR for over a decade of running his fund.
Here are 9 Investing Principles he lives by 👇
1. Why Value Investing Works
The market isn’t built for value investors.
It is built in a way that increases the urge to speculate.
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 increases the urge to speculate.
That’s why businesses are so often misprized in the short term.
Value investors can benefit from this circumstance.
2. Understand Who You Are
You’ll be more interested in some industries/topics than in others.
And 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/topics than in others.
And 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.
3. Be 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 the 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 the paper.
4. Find the Truth
A journalist also has to find the truth before he publishes a story.
The same goes for an investor. You don't want to be a boulevard journalist publishing half-truths.
Thus, you must avoid all sorts of biases and research until all your questions are answered
A journalist also has to find the truth before he publishes a story.
The same goes for an investor. You don't want to be a boulevard journalist publishing half-truths.
Thus, you must avoid all sorts of biases and research until all your questions are answered
5. Commitment Bias
One of these 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 these 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.
6. 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.
7. Volatility
As explained before, stock prices are a lot more volatile than the business behind that stock.
Investors, therefore, should pay attention to slow, long-term changes in the business instead of stock prices.
As explained before, stock prices are a lot more volatile than the business behind that stock.
Investors, therefore, should pay attention to slow, long-term changes in the business instead of stock prices.
8. MoS as 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.
9. 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. Instead, 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. Instead, focus on what can be valued.
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Follow me @MnkeDaniel to learn more about Investing, and visit my Website ;)
Have a great day!
Follow me @MnkeDaniel to learn more about Investing, and visit my Website ;)
Have a great day!
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