Li Lu, the "Asian Warren Buffett", turns 58 today!
He is a Chinese-born Superinvestor who has achieved a compounded annual return of about 30% for over 25 years.
To celebrate his Birthday, here are his 9 Keys to Successful Investing👇🏼
He is a Chinese-born Superinvestor who has achieved a compounded annual return of about 30% for over 25 years.
To celebrate his Birthday, here are his 9 Keys to Successful Investing👇🏼
1. Why Value Investing Works
The market isn’t created for value investors.
It is built to increase the urge to speculate.
That’s why companies are so often misprized in the short term.
Value investors can benefit from this circumstance.
The market isn’t created for value investors.
It is built to increase the urge to speculate.
That’s why companies 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/companies than in others.
Instead of trying to benefit from every new hype, use the advantage of freedom in investing.
Only invest in what you know and where you have an edge.
You’ll be more interested in some industries/companies than in others.
Instead of trying to benefit from every new hype, use the advantage of freedom in investing.
Only invest in what you know and where you have an edge.
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 need to be able to clearly articulate your thesis and research.
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 need to be able to clearly articulate your thesis and research.
4. Find the Truth
A journalist also has to find the truth before he publishes a story.
The same goes for an investor. He's on the search for the "truth" behind the company.
Thus, he has to avoid all sorts of biases and misleading influences clouding his judgment.
A journalist also has to find the truth before he publishes a story.
The same goes for an investor. He's on the search for the "truth" behind the company.
Thus, he has to avoid all sorts of biases and misleading influences clouding his judgment.
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 underlying business.
Investors, therefore, should pay attention to the slow, long-term changes in the business instead of stock prices.
Use volatile times to look for opportunities.
As explained before, stock prices are a lot more volatile than the underlying business.
Investors, therefore, should pay attention to the slow, long-term changes in the business instead of stock prices.
Use volatile times to look for opportunities.
8. 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 threat can be minimized by using a margin of safety.
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 threat can be minimized by using a margin of safety.
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 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.
He also has a great taste for investment classics.
You can find his and many more Superinvestor's book recommendations here:
danielmnke.com
You can find his and many more Superinvestor's book recommendations here:
danielmnke.com
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Follow me @MnkeDaniel to learn more about Investing!
Have a great day!
Follow me @MnkeDaniel to learn more about Investing!
Have a great day!
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